Bunzl Stock

Hello, everyone, and thank you for joining us for the Bunzl Results for Half Year Ending 30th of June 2026. My name is Chach, and I'll be coordinating your call today. [Operator Instructions]

I'd now like to hand it over to Frank to begin. Please go ahead.

Good morning, and welcome to Bunzl'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'm 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 Bunzl's fundamental resilience. Furthermore, Bunzl'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 GBP 500 million share buyback today while maintaining headroom for acquisitions.

Overall, Bunzl'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 Bunzl 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 5 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 Nisbets 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.

Bunzl'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. Free 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 2 acquisitions year-to-date. With deal momentum building, we continue to expect higher annual acquisition spend in 2026 compared to 2025.

And lastly, as I've 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 constant exchange rates unless otherwise stated. In addition, within our results, you will see adjustments for refunds we received related to U.S. IEEPA 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 2/3 of this being driven by volume growth and 1/3 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 cost -- operating cost to sales ratio increased from 21.8% to 22% at actual currency. Adjusted operating profit for the year was GBP 441 million, an increase of 8% from 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 annualization of Nisbets synergies.

Moving down the P&L. Adjusted net finance expense of GBP 60 million and the tax rate of 26% are both consistent with our full-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 backlog.

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 reduce 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 a 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 a reduction in U.S. tariff rates. Revenue growth was led by a 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 Foodservice 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 a very strong revenue growth, also supported by acquisitions and the performance within our online businesses continue to improve. France delivered some volume growth, which was partially offset by selling price deflation, which has been moderating. Our largest business in Cleaning & 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 U.K. 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 part -- was driven by Foodservice, 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 annualization of Nisbets synergies and a one-off property-related gain despite overhead inflation. The increase in operating margin also translated into a strong increase in the U.K. 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 Health Care businesses. Although within this, our operations in New Zealand have been impacted by reduced public health care spending. While Brazil benefited from inflation in certain categories, which supported moderating deflation overall, there was more limited inflation impact in Asia Pacific. 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 health care 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, Clean & Hygiene and Health Care, driven by strong growth across our Asia Pacific Healthcare businesses as well as higher inflation in North America. Growth in Foodservice and Grocery were both driven by the strong performance of our North American Distribution business. Within distribution, grocery 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 cash flow. We generated GBP 328 million of free cash flow in the period, which includes an inflow of GBP 71 million related to tariff refunds. Excluding this inflow, cash conversion was 90%, slightly lower than usual due to the investment in working capital, but in line with our target. 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 GBP 268 million. GBP 26 million was spent on net acquisitions, resulting in a net cash inflow of GBP 242 million.

Turning to the balance sheet at 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 U.S. tariff refunds, partially offset by an increase in receivables and slightly higher inventory. Deferred consideration relating to acquisitions increased by -- decreased by GBP 12 million to GBP 213 million, driven by earn-out payments related to previous acquisitions. There was an increase of GBP 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 1.8x, 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 2.5x 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, Bunzl has returned GBP 2.7 billion through dividends, committed GBP 6.2 billion in acquisitions and returned GBP 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 prioritize capital to invest in our own business and in bolt-on 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 bolt-on acquisitions, where committed spend per deal averaged around GBP 25 million. Over this period, we spent an average of GBP 300 million per annum on bolt-ons. The average multiple that we have paid for these businesses has been consistently around 8x operating profit.

Recent deals have demonstrated a strong 2-year return on invested capital of 13.3%, comfortably ahead of our project work. 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 GBP 100 million on bolt-on acquisitions whilst in 2023, we spent nearly GBP 500 million. Our pipeline is active and we continue to expect committed spend to be more in 2026 than 2025.

With current leverage of 1.8x and strong annual cash flow, we have significant headroom. This is supported by the fact we have spent less than GBP 150 million on acquisitions over the last 20 months compared to a typical spend of around GBP 600 million over a 2-year period. On this high-level illustration, we have headroom of 0.15x to 1x net debt to EBITDA. Every GBP 100 million allocated to bolt-on acquisitions initially impacts leverage by a little under 0.1x. We, therefore, have a level of excess cash that supports a GBP 500 million share buyback over the next 12 months without compromising our pursuit of bolt-on 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 2.4x, 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 U.S. 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 compared to the 7.6% margin reported in 2025, which excluded the GBP 8 million share-based payment credit. This is due to stronger-than-expected profitability in H1, which was driven by the net impact of inflation, much of which is expected to be temporary.

Overall, we expect modest growth in adjusted operating profit. 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 annualize. We are already starting to see some selling price normalization, 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 GBP 125 million and GBP 130 million.

I will now hand back to Frank to take you through our business update.

Thank you, Richard. Firstly, let me give you an update on North America. As part of this, we thought it would be helpful to provide you with some updated disclosure, including our end customer revenue split. Although, as a reminder, our operating companies operate across customer sectors, and so our businesses are not run simply in our accordance with the chart here. As you can see, distribution accounts for around 60% of North America revenues. Therefore, a now stabilized distribution business is very important for the resilience of North America and the Group.

Within Distribution, approximately half of its revenues are generated from grocery customers with another quarter coming from Food Service redistribution. The remainder is made up of customers across Retail, Food Processor and Cleaning & Hygiene. The other 40% of North America is diversified across many sectors. This diverse sector mix supports the resilience of North America and the Group. North America's largest 40 customers are mostly distribution customers and have an average partnership with Bunzl of over 20 years. Customers are very sticky in our industry, and we enjoy very high retention rates, in general, given the essential nature of our products and services.

While North America is a more concentrated customer base than other parts of the group, its top 3 customers account for less than 25% of revenue, with this weighted to our largest customer. And customers 4 to 10 account for less than 15% of revenue. There is then a very long tail of smaller customers. In terms of financials, margins vary across businesses, but those with lower margins tend to have higher inventory turns. And as a result, return on average operating capital is broadly similar and attractive across sectors.

Focusing now specifically on our North America Distribution business, where we have continued to make strong operational progress. I've spent a lot of time in this business and the actions we have taken have significantly improved execution within our new organizational structure. The new sales and operations model, which enables a much greater focus on long-term growth opportunities, now has the right processes in place to enable effective servicing of both local and national customers. The model is working well. As part of actions taken, we have reinforced our leadership structure within local food service, and that has brought greater focus in that sector. Importantly, agility has now been restored in the local business with local teams responsible for pricing and inventory decisions for local customers as well as for local sourcing decisions.

As a result, our availability and commercial responsiveness are now back at our desired levels, as are our service levels with on time in full now back to 2019 levels. Our sales teams are motivated and engaged, and collaboration between teams has noticeably improved. Staff turnover, which we believe has always been well below industry averages, but increase in 2025, has fallen meaningfully over the last 12 months.

And finally, we have strengthened our relationship with customers and our engagement with third-party suppliers. This has included a more balanced approach to own brand that also focuses on growth we can achieve with preferred branded suppliers. For example, on the bottom right is a recent promotional program we ran for hygiene products alongside multiple branded suppliers. Customers are also noticing these improvements, as highlighted by the quote in the top right of the page.

The operational improvements outlined on the previous slide are now visible in Distribution's improved financial performance. Distribution delivered 8% underlying revenue growth in the first half. This was mostly driven by volume growth, including the new business wins in the fourth quarter of last year and success with established grocery partnerships. The second quarter, volumes grew by 2% in our redistribution segment with [Technical Difficulty] service customers. This is an encouraging performance, given continued market challenges for customers in that particular segment.

Inflation was also positive in the period for Distribution. The business saw a moderate increase in operating margin, outperforming North America as a whole. The improved performance of the business alongside the net positive impact from inflation more than offset the mix headwind from strong growth in grocery, new business wins that are typically lower margin initially and higher variable costs as a result of the improved performance.

While the end markets remain challenging, we are now in a good position from which we can focus on increasing market share through new customer wins and increased wallet share. Near-term priorities for the business also include hiring a new CEO of distribution and opening 2 mixing centers on the East and West Coast, which will hold imported products for our distribution centers. This will improve product availability across the business, enhance warehouse productivity and create commercial opportunities with customers. The actions we have taken and continue to take will strengthen our distribution business and provided with a strong platform to deliver a sustainable long-term growth.

Turning to Continental Europe. A significant warehouse consolidation project is now fully operational in our largest French business, where we have gone from 15 to 6 warehouses. This has been a large undertaking by the team, and it will make a big difference to our operational efficiency, improving product availability and delivery time for our customers. We are already benefiting from some tangible improvements with higher service levels, lower inventory, increased warehouse capacity as well as improved health and safety. There will be further productivity improvements as we fully roll out a number of digital tools, including warehouse management systems and demand management planning.

Whilst this was a bigger project, warehouse consolidations are a key lever for operating efficiencies across the group, and we are always looking for these types of incremental opportunities. We've also entered into an existing -- exciting partnership with adidas, which is a great example of the group's entrepreneurial culture and continued focus on driving organic growth. This focus achieved net new business wins worth around EUR 30 million of annualized revenue in the first half in Europe overall. The adidas partnership is a global exclusive license agreement for the design, manufacture and distribution of safety footwear. The initial launch is in a number of European countries across different businesses.

The partnership is a testament to our safety expertise and global network of Safety Distribution businesses. These benefits were recognized by adidas and instrumental in them choosing to partner with Bunzl to introduce adidas workwear shoes. Looking forward, there is a significant growth potential as we look to expand the product range, the product categories and the number of geographical markets.

Turning to our long-term growth model. Bunzl is fully focused on delivering against its well-established compounding growth strategy, and a good first half performance reaffirms our expectation that 2026 will be the foundation for future profit growth. I, therefore, want to take a moment to briefly remind you of its building blocks. Firstly, Bunzl's growth opportunity is supported by its underlying resilience. This resilience is driven by the geographic and sector diversification of our 150 businesses and their focus on essential products.

The Group benefits further from its scale, strong cash generation and its entrepreneurial culture. These fundamentals underpin our growth strategy, which is founded on profitable organic growth and disciplined value-accretive acquisitions. We also continue to drive ongoing operational efficiencies, and where appropriate, distribute additional returns of capital. Bunzl has a strong total return model. Part of the group's resilience stems from its geographic and sector diversification. We provide you with an updated snapshot on this slide.

This resilience in part reflects the fact that grocery and food service revenues are relatively similar in scale and tend to have opposing trends. When people eat out more, they eat at home less and vice versa. Furthermore, around half of Group's profit is now generated from the 3 sectors that we see the greatest growth opportunity and that had the highest operating margins, Safety, Health Care and Cleaning & Hygiene. However, it is important to remember that while these 6 sectors have different margin profiles, their return on capital employed are all attractive and broadly similar. Those with lower margins tend to have higher inventory turn, all are highly cash generative.

Organic growth remains a key focus for all of our businesses. We drive volume growth through exposure to growing customers, increased share of wallet with existing customers and to winning new customers. These factors all contributed to our volume growth in the first half. Across our diversified operations, activity in our end markets is important. Therefore, on average, we expect group volume growth to be driven by real GDP in our markets. We drive price growth to offset inflation, and we have shown that we are very good in navigating volatile trading conditions while also focusing on long-term customer relationship.

We also target ongoing operating efficiencies where small incremental improvements compound significantly over time and support our management of cost inflation. We completed 15 warehouse consolidations and relocations in the first half of 2026, a larger number than we would typically expect over 6 months. And in the first half, 78% of our orders were processed digitally. This compares to 76% across 2025. As we implement new systems to improve productivity, artificial intelligence is playing an ever increased growth. Our entrepreneurial and data-driven culture lends itself well to adopting new technology, and AI is becoming embedded into everyday sales, operations and support processes.

On top of organic growth, Bunzl has an excellent long-term track record of delivering growth through acquisitions. In large and very fragmented markets, Bunzl is one of very few scale players and the natural consolidator. The sticky nature of customers in this industry makes bolt-on acquisitions at attractive valuations and compelling growth lever. Having done over 230 acquisitions since 2004, we have very strong acquisition capabilities and processes across the organization. Central expertise alongside local market knowledge reduces the execution risk of acquiring businesses. They're also an attractive acquirer for potential targets, long-term home for businesses with benefits from our scale, investments made for the benefit of all our businesses, knowledge-sharing opportunities and our entrepreneurial culture.

And as Richard demonstrated earlier, bolt-on acquisitions are highly value accretive. Between 2021 and 2025, bolt-on acquisitions contributed on average annual revenue growth of 2.6%. We also actively recycle capital, including 4 disposals since 2022.

In summary, Bunzl has delivered a good performance in the first half of 2026 with broad-based volume growth led by North America Distribution, effective management of inflation and strong profit growth. In particular, the period reflects a turning point for our distribution business. The Group has also continued to demonstrate the strength of its resilient business model in an uncertain macroeconomic and geopolitical environment.

Overall, I am pleased that we can now guide to modest profit growth for 2026 and look forward to this year being the foundation for future profit growth and a return to Bunzl's successful compounding growth algorithm.

Thank you for your attention. We are now happy to take your questions.

[Operator Instructions] Our first question today comes from Zachariah Al-Qaryooti from Morgan Stanley.

I have 2 questions, please. Firstly, could you please unpack the moving parts for the operating margin in the second half, i.e., what is embedded in your full year guidance? For example, how is gross margin developing so far? And how do you assume that, that will evolve over the remainder of the year? And then similarly, your assumptions around OpEx?

And then the second question on M&A in the context of still a lower deal spend relative to history, how has the M&A landscape evolved? I appreciate you called out an expected acceleration in the second half. So should that signal to us that the landscape has improved recently? Or is it driven more by the timing of you getting certain deals over the line?

Well, let me take the operating margin one to begin with. So we are -- when we look at the first half, margins have improved 30 basis points, which has been largely benefited from the inflation effect on the inventory gain, net of fuel and freight increases. If we take those out, actually, margins are still slightly up in the first half, but the effect is largely down to the inventory gain.

When we look into the second half, we are expecting margins to be lower year-on-year. The extent is essentially the same as we talked about at the pre-close statement back in June. The factors and the parts of the bridge, I mean, firstly, we do expect to see this inventory gain unwind. We have already seen gross margins peak in June and reduce in July. We're effectively also seeing selling prices reduce alongside that.

The first half also benefits from Nisbets synergies, which annualized in the first half, and therefore, will not repeat in H2. Obviously, we've got the new business wins, which we achieved in Q4 last year, which will annualize in the second half, and we'll continue to see ongoing higher variable costs linked to profit performance. Those together explain the reason why margins in the second half will be down year-on-year as opposed to up in the first.

Let me take the M&A question. Obviously, we are operating in large fragmented markets. We have about 1,300 targets in our database. We are the largest business in our field that consolidate these markets. Let's say, sometimes uncertainty in markets can make people wait in selling their businesses. We certainly have seen that effect in the last 18 months. I would say the magic word in the acquisition strategy that Bunzl follows is discipline. We want to do the right things. We see an active pipeline. So we feel good about that. But I also say -- we always say champagne at the finish. I'm not getting worried if we are not able to close an acquisition in December, and it ends up to be January. We want to do the right things.

We've seen years where we did GBP 100 million on acquisition bolt-ons. We've seen years of GBP 500 million. So these things can be a bit lumpy, but I'm building this group for the long term. We have a massive opportunity. Our overall market shares are still relatively low in most markets, but we are leading, and I feel good about that. So I hope that answers your question.

The next question is from Rory McKenzie from UBS.

Firstly, I just wanted to clarify the modeling of the tariff refunds. Is it effectively removing GBP 70 million of revenues at a 0% operating margin? And then on what basis are you now guiding for FY -- or full year margins? In the presentation, you throughout referred to a 7.3% margin in H1, but technically, it's a 7.4% margin. So how does that accounting change fit into the changed margin guidance language, please?

And then secondly, I had 2 questions about the inflation tailwinds. Just to follow up on that point you made on the guidance, Richard. If we attribute all of the 60 bps gross margin improvement to that inventory gain, then that's about a GBP 35 million gross benefit in H1. Why would that necessarily all reverse in H2? I'm just not clear why it would be symmetrical as I don't think prices have quite fallen in the same pattern as they rose. And then finally, Frank, can you just talk about how you've seen customers respond to the inflation spike and what your teams are doing to try and manage this new environment? It sounds like volume sensitivity has been high, but at a group level, you've kept good volume momentum through H1. So what do you think has been behind that?

So let me take the first 2. On the accounting for the tariff refund -- so overall, what we're seeing here is we're expecting this to be -- this refund that we received just before the half year to be repaid over time with, I would imagine, quite a lot of this being repaid in the second half. As a consequence, we are reflecting a deduction against our reported revenue, our underlying revenue of 1.2% and we are then making adjustments to cost of sales to effectively mean this is not -- there's no profit impact on this adjustment. We do, as you'll have seen throughout the statement or in the financial statements themselves, obviously, it includes all of the refund in all of the areas where it should be.

When we're looking at the key metrics, we've sought to adjust them to try and get back to what we believe is true trading, i.e., not trying to show true revenue growth and indeed, to your point, not to show actual operating margins, which are higher -- look higher than they really are. So including the refund, you'll see that margins are at 7.4% reported. But when we take it out, actually, the real underlying margin is 7.3%. And when we -- and we're forecasting forward on the same basis. So when we talk about margins around 7.6% for the full year, that would be excluding any impact of tariffs.

On the inflation piece, look, our view is very much that we are already seeing both selling prices reduced. And obviously, we're increasingly selling through higher-priced inventory as we've gone through Q2 in particular, and sold through the pre-tariff inventory or the pre-price increase inventory. So we do expect to see prices -- selling prices reduce. We are seeing that, and we're seeing gross margins decline. As to the pattern of change, we saw these prices increase quite quickly during Q2. We are seeing prices come down quite quickly as well. And I think that talks to the fact that there is a heightened sensitivity to volumes in our manufacturer base who are wanting to make sure they don't -- they want to protect volumes and don't hold prices high for too long. We're also of the same mind. We want to make sure that we bring our prices down appropriately, protecting volume.

Yes. And just in terms of how our teams do, I think Bunzl is -- the management teams around the world are very effective in terms of managing margins. It's a bit different than it was in COVID, where there were strong availability issues. This is a bit more like oil price related. Plastics, we've seen some big increases in disposable glove, for instance, as a category. These things change also. We run what we call an overwatch group where we have the 150 top buyers across the world, having weekly calls, monitoring the biggest product groups, real big benefit of being part of Bunzl to navigate all these things and ultimately make sure that we're doing the right thing on the margins, but also make sure that we are very focused on retaining and growing volumes as well.

The next question is from Will Kirkness from Bernstein.

I just wanted to -- sorry, follow up on the margins, and then I had a couple of other questions. So I think you said your margin assumptions are largely unchanged from the first half pre-close. But if we looked at oil pricing, which should feed into that plastics component, I mean, they're up sort of 20%, 25%. So I just -- I appreciate you probably got price coming back a bit and then we have the dynamics with your suppliers. But is there not a view that there's potentially a resurgence in pricing that happens and maybe flows through a little bit later?

And I guess it's maybe a little bit early, but how would that feed into a view on '27 margins? And then linked to that, I guess, thinking about margins longer term, is flat the right way to think about that? Or does mix, own brands, warehouse consolidation, all the stuff you talked about drive longer-term accretion? And then my final question was just on North America. I think in the presentation, Distribution saw underlying revenue growth of 8%. So does that mean the rest of the business was about flat?

Let me take the margin, the short-term margin point. Well, look, I hear what you're saying, well, I think we've -- despite the fact that we've seen -- when we did our pre-close, oil prices dropped significantly. And on the day, I think we were back to pre-war prices at the time. Subsequent to that, we've seen oil prices rise again. But actually, what we've seen on the ground is that our input prices of particular categories and also our selling prices are starting to reduce. So even though it's -- we're still -- we do see higher levels, we're certainly not seeing it at the moment. All we're seeing is actually prices reduced. Is there a potential for resurgence?

Look, we don't think so. It's not what we're seeing. If it did happen, then yes, presumably, there will be some level of price increases, albeit it's often harder to put prices up if this is just a very volatile movement up and down short term. And this obviously being played out very publicly, which would make that harder. So I think the right assumption is the assumption we're guiding to, which is that margins -- selling prices and margins decline, we see lower margins in H2 than the second half of last year and that provides a sensible exit rate when looking at 2027. As to margins for the longer term, look, we don't give margin guidance in the longer term, but what we do see is that we're very focused on making sure that profit growth -- profits improve and grow.

And as we've said, I think on a number of occasions, we see 2026 as a mechanism or a base from which we think we can grow profits organically and inorganically. There are plenty of things, actions we take. You mentioned some of them to make sure that our margins in the longer term are either progressed or indeed are protected. We need to grow volume. And we do see further potential for own brand growth. And of course, acquisitions will be -- tend to be a net positive for us on the inorganic side. So there are plenty of routes for us to protect, grow margins, but our focus is mainly on growing profits from a base that 2026 is establishing. Frank?

Yes, I think the question on volume growth, North America. So North America has been leading the pack, but actually, we're quite pleased that we have seen a broad-based volume growth in all the regions. Inflation was strongest in North America and in Continental Europe, especially in the second quarter. But what makes me very happy is actually in the business where we have seen some of the execution issues that we're now seeing there the strongest growth. So Bunzl Distribution is leading the pack, which is clearly what's something we've been working very hard on and to see that it's happening there is fantastic to see.

And just on the point on growth in North America, obviously, distribution growth of 8% is very strong and accounts for a very significant proportion of the total. We do have some parts of North America, which has been under pressure. Our businesses in Mexico, retail and in our convenience store business have also seen market softness. Our convenience store business has also lost volume. So there has been a mix -- a relatively mixed picture in some areas, but our distribution business has been very positive.

The next question is from David Brockton from Deutsche Bank.

I wanted to just pick up where that last question ended on the U.S. distribution business and the 8% underlying growth you've seen there. You rightly cautioned that some of that growth reflects the annualization of wins from the prior year. Can you just touch on what the outlook is for similar volume wins to what you secured in Q4 of last year, either in new categories with existing customers or new customers? And how should we think about the sort of sustainable growth opportunity for the Distribution business going forward on an organic basis? And sorry -- finally, related to that, do you feel that you've now got that sales channel for local customers fully restored and embedded in the business?

Yes. So well, basically, I think what is fundamental is to see that the Distribution business, let us call it the machine is operating in terms of on-time in-full. I would say in Distribution, there's 3 things important: on-time in-full, on-time in-full and on-time in-full, a bit like property, property, location, location, location. Agility has returned and the motivation of the team is very effective. So I think that is something that should be contributing everywhere. At the same time, we see that there is some disruption in the market with some competitors that are going to change processes or have a very difficult time. We believe that with a bit of focus that we, longer term, should be benefiting from that.

So let's say, having that business struggling to now in a position to continue to focus on growing the business is obviously very important. The sales channel you were referring to in terms of the local business, yes, we spent a lot of time on that particular part of the business. People locally are now able to make local decisions on price exceptions. We have their visibility on the true cost prices. They can bring in stock from the suppliers they prefer. They obviously benefit from the national own brand program. So certainly, the last few times I was in the U.S. And when I'm in the U.S., I always spend time with the sales teams because they give me the direct feedback from what customers are thinking. I've visited a lot of customers, spent a lot of time with our largest food redistribution customers.

And you just feel that there's a very positive sentiment around what is happening. People are motivated. So yes, I think we are in a good position. There's always things you can fine-tune. But I think the machine is working. I think the focus is on growing the business. And sometimes with the bigger accounts like in grocery or national customers, that can also be a bit lumpy. Sometimes you win and then sometimes it takes a while and then you bring something else in. But I think, let's say, the broad-based organization is functioning, is set up for growth. And ultimately, that should help us develop the business in a positive way.

[Operator Instructions] We have a question from Tim Ramskill from Bank of America.

A few questions from me, please. I'll start with the -- again, some of the dynamics around growth. So I guess you asked a moment ago about whether the rest of the U.S. business ex distribution is delivering any growth. It doesn't look like it is to me. And then I guess your growth rates outside of North America are somewhere between 1% to 2% which, again, given the backdrop of inflation being a feature everywhere. I'm just interested in your thoughts as to whether those growth rates are sort of acceptable to you, whether you think there's improvement potential, perhaps you haven't spent enough time talking about the other geographies.

And then, Richard, as you pointed out in your preprepared remarks, the comps are obviously going to be a bit more challenging in the second half of this year. But indeed, now we can see that the comps going into the first half of next year are going to get more challenging still. So just your thoughts early as they might be on the early shape of 2027. And then the last one, if I can, just on tariffs, just to sort of help bring us all up to speed on all the different moving parts. I guess, part one, do you think this is all done now? Is there any sort of residual effect you might see in the second half? And then just how does it work through the supply chain in terms of these tariff rebates to your customers, from your suppliers to you, et cetera? Just interested in how that all flows and how it impacts on the cash flows.

Can you take this, Richard?

Yes. So look, I think the growth across the group, but we're actually pretty pleased with the fact in the first half of this year, we're seeing not only good volume growth in North America, but actually volume growth across all of the business areas that we operate in. There's no doubt there has been an inflation benefit. And I think as Frank talked to on the call, these price increases don't put themselves up. We have to -- our sales teams have to manage that process, and I think they've done that very effectively.

As to is this an acceptable level of growth? Well, look, we also -- and Frank covered in his section, we think Bunzl should grow volumes by real GDP in the markets that we operate in. Now real GDP at this point is probably quite low in many of our markets. But nonetheless, I think it's -- we essentially service the activity in the economy, not necessarily some of the more peaky CapEx type spend in data centers, for example. But general activity on the high street or Main Street is what we do service, and that would lend itself to being in line with real GDP.

I think a separate question is, do you think there's going to be ongoing inflation in our markets? I mean certainly, since COVID, we've seen a lot of inflation, post-COVID inflation and now, of course, one linked to the Iran war. If you believe there's more net inflation around, then that's also additive to our growth and will be part of what we would see as our growth algorithm alongside, of course, an ability to grow via acquisition and consolidate these highly fragmented markets. So that's the first question.

On comps in '26 H2 and exit rates into 2027. We will -- we do see the annualization that we've talked about of that new business wins in North America. It is absolutely fair to say that all of our businesses around the world are very active in reviewing pipelines, looking to grow the top line. And I think we're seeing good levels of success. I mean the adidas initiative that Frank talked about is an interesting organic opportunity for us with a very, very well-respected brand. Now I don't think that changes really second half trends and into 2027, but nonetheless, it is a real focus for our businesses. But as we exit the year with revenues lower than they have been during the year, particularly in volumes, yes, I do think there's an impact on 2027. We're not in a position to give any sense for '27 at this stage. We'll come back to that later in the year.

But I think shape-wise, there is some impact. And on tariffs, how is this going to work in the second half? Look, it's -- as you'd appreciate, this is uncharted territory for most people. I don't think anybody has really ever seen the U.S. government handing back this sort of money to suppliers. We don't see any further tariff refunds coming. There might be -- if they are, they will be very small. I think we've had the lion's share of it. Our businesses litigated early in the process to make sure that we were towards the front of the queue, and that's how it's turned out. As to how it happens with the supply chain, I mean, really, it's not really -- the supply chain point is really us to customers. We will have and are having conversations with customers around returning these refunds. But look, we will know more as we go through the second half, and we'll keep the market updated.

You have the cash and you expect the cash mostly to flow out in the second half, I think is what you said on that point.

Yes. Look, that's our sense, Tim. I think let's see how we -- how it goes. But yes, I think we will be paying it back up a little bit in the second half.

Okay. Great. If I can be really cheeky, just there's probably about 6 parts to my first question. But just on distribution more broadly in North America, sort of -- where are you guys at relative to the high watermarks? In other words, how much recovery potential does the business still have?

Yes. So what I said is we really focused on the fundamental issues we had in the business. And just to put in context, this is a $5 billion business. The change process we went through was never going to be easy. So it's a fundamental change. So yes, we had some issues, but we fixed them relatively quickly, and we have focused on the key components. They are operating now very well. So I would say that I think the machine operates well. I think like in every business, there are always areas where you can still fine-tune it.

And the focus now is on growth, on winning back. Sometimes you can't win back what you have lost, but you win back something else or other categories or newer or newer customers or newer types of customers. So we're in this phase of -- the business is operating well, and we are -- there's more focus on growth and opportunities in the markets. And I assume in the next couple of years, we will see the results of that coming through.

We have no more further questions. So I'd like to hand back to Frank for closing remarks.

Thank you very much for attending our 2026 half year results presentation. I hope you have a good day.

This concludes today's call. Thank you for joining. You may now disconnect your lines.

Good morning, and thank you for attending Bunzl's 2025 Full Year Results presentation. I appreciate you joining us today. I will start by summarizing our 2025 results and will provide an update on the actions we have taken to improve performance. Following this, Richard Howes, our CFO, will take you through our financial results, capital allocation and outlook for 2026. After that, I will return to discuss how we are positioning the group for an improved performance and continued long-term growth.

2025 was a challenging year. We were impacted by issues related to a significant organizational change in our largest business, which has been amplified by increasing end market weakness. This led to a meaningful drop in the group's adjusted operating profit over the year. We took decisive actions to improve performance and in the second half, delivered a moderated margin decline and a return to underlying revenue growth. While end markets remain uncertain, we are reiterating the 2026 guidance we set out in December and continue to focus on delivering the things we can control.

In 2026, we anticipate further underlying revenue growth and expect a more stable adjusted operating profit. We expect this to be a foundation for future organic profit growth.

There also continues to be a significant consolidation opportunity within our markets. We are disciplined and with an active pipeline, expect growth from acquisitions to provide strong upside to future profits as it has done historically.

I also want to reiterate my confidence in the Bunzl model and its strong fundamentals, such as high cash generation. We operate in attractive end markets, and I remain very confident in the group's medium-term growth opportunity.

Revenue grew by 3% at constant exchange rates, driven by acquisitions and slightly positive underlying growth. However, our operating margin was 7.6%, excluding a share-based payment credit that Richard will explain later, down from 8.3% in 2024. Importantly, actions taken during the year supported a moderation of the margin decline in the second half compared with the first half.

Adjusted operating profit overall declined by 4% at constant exchange rates. This is in line with the expectations we set out in April 2025 despite some of our key markets becoming more difficult through the year.

The group remains highly cash generative, and we delivered GBP 579 million of free cash flow. We also completed a GBP 200 million share buyback in October and ended the year with adjusted net debt-to-EBITDA of around 2x at the lower end of our target leverage range. We remain committed to a progressive dividend policy and have grown the dividend modestly over the year. With the dividend and buyback, we returned almost GBP 450 million to shareholders in the year.

After a record 2024 for acquisition spend, we announced 8 acquisitions in 2025. Total acquisition spend was lower this year at GBP 132 million, reflecting the macro environment, although our pipeline has remained active. Return on invested capital over the year was 13%, impacted by our profit decline.

Before Richard takes you through the numbers in more detail, I would like to give an update on the areas that have impacted us most this year and a bit of context on the macroeconomic backdrop as well as the actions that we have taken to improve operational performance.

Over the year, we have experienced issues related to our largest business, North America distribution, which represents around 30% of group revenue. The business was impacted by its move to a sales and operations model, which separates logistics and supply chain from sales activities. This change, which was largely implemented by the start of 2024, has supported our growth with national accounts, enabled more coordinated process across the business and has allowed us to develop a better own brand offering. However, initially, new processes reduced the agility of our local teams, which impacted business with their customers. We kept the customers but lost some wallet share.

In the first half of 2025, markets weakened, which led to volume pressure and increased customer price sensitivity. This amplified our execution issues. Our businesses worldwide have felt the impact of significant global macroeconomic uncertainty and the pressure it has put on business and consumer confidence.

Furthermore, we saw supply chain disruption related to tariffs. In the U.S., consumer confidence, which is now at a 14-year low as well as inflationary pressures in certain food products has contributed to reduced footfall in restaurants and convenience stores. Furthermore, the food processor sector continued to experience industry-specific challenges related to supply and demand of cattle. Together, the foodservice redistribution, convenience store and food processing sectors are around for more than 1/3 of our revenue in North America.

In Brazil, we've also experienced challenges to fully passing on currency-driven product cost increases alongside weakening industrial demand.

We took a series of decisive actions to improve performance, including leadership changes and increased cost management, which took effect from the second quarter. These actions have driven operational improvement. We have reengaged and motivated the team supported by this leadership change and a recent employee survey has confirmed an increase in the engagement of our local sales force compared to 2024.

We have improved execution of the new sales and operations model. Pricing and inventory decisions for our local business have moved back to our local teams, which has improved their agility and response times. This is particularly important in the dynamic redistribution market. Furthermore, as a result of separation of our sales function in our new organizational model, we now have a more robust sales pipeline management process, which improves our visibility and accountability of opportunities.

Core business basics have been restored with service levels significantly improved and back to our very high standards with better product availability and inventory stabilized. And lastly, we have strengthened our relationship with our preferred branded suppliers and have increased our joint initiatives with them to target specific market opportunities together. Alongside this, we have seen an increase in our own brand penetration over the year with new category launches well received.

Overall, these actions have supported us establishing more than $100 million of new business in the fourth quarter, representing both national grocery and foodservice customers. These wins include both new customers and wallet share gains with existing customers. We believe that our business model change has been a strong support to this success. I am encouraged by this performance.

While we have seen increased pressure in other North America businesses in the second half, distribution's underlying revenue growth improved, and we saw a moderation in its year-on-year operating margin decline.

Looking ahead, our strategy is to build a strong platform to drive long-term profitable growth. We are focused on continued market share gains through both new business wins and increased wallet share of existing customers, ensuring a well-functioning operating model, which allows us to enhance our focus on sales and deliver an optimal service for both larger and local customers, continued complementary own brand growth alongside preferred branded supplier growth and importantly, motivated teams.

Turning now to Europe. Across Continental Europe, we have been operating in a challenging environment since the second half of 2024, particularly in France, where deflation, a weak economy and operating cost inflation have put pressure on margins. In response, we took a series of actions focused on both driving business wins and improving operational efficiency.

To more effectively manage new business opportunities, we have enhanced our monitoring of major tenders and strengthened cross-country collaboration. We are also now more proactively showcasing our wide range of value-added services with our leading sustainability offering being a great example.

As a result, when considering larger relationships that are worth over EUR 100,000 per annum, we won EUR 50 million of new business in the second half of 2025. Own brand continues to be a key tool for us. And in Europe, we saw a further 1% increase in own brand penetration, supported by both acquisitions and organic improvement. We are creating new growth opportunities by launching existing own brand products into new geographies.

We are also seeing procurement benefits by consolidating purchases across multiple operating companies. For example, in towel tissue, which is a large own brand category for Bunzl. We also continue to identify operating cost efficiencies with 10 warehouse consolidations and relocations completed in 2025 in Europe. The majority of these have been in France, where we have had a significant project underway in cleaning and hygiene to reduce the number of warehouses from 15 to just 6 to improve efficiency and to enhance product availability and delivery speed for our customers. This program has now largely been implemented, and we expect net benefits in 2026.

In addition, a number of labor optimization projects have been launched, which also includes limits on discretionary spending and the implementation of AI tools to improve efficiency. In 2025, we also saw additional businesses onboarded to our preferred demand planning software, which supports improved inventory levels and availability and reduces cost. Overall, these actions have resulted in operating cost inflation being well managed in 2025 and combined with easier comparatives, supported a stabilization of operating margin year-on-year in the second half.

Let me also spend a few moments on wider strategic progress across the group. As I've mentioned, it is encouraging that we have returned to underlying revenue growth in the second half, supported by new business wins. We completed 8 acquisitions, including our first entry into the health care sector in Chile and established a physical presence in Slovakia.

We continue to deliver operational efficiencies, including better-than-expected synergies from Nisbets' acquisition and multiple warehouse initiatives resulting in 36 consolidations and relocations across the group compared with 19 last year. We further enhanced tools that support customer stickiness and saw own brand penetration increased to 30% and digital order penetration increased to 76%.

It is our strategic initiatives alongside our actions in North America and Europe, which provide the foundation for future profit growth. This is enabled by our people who are our greatest asset. During 2025, we maintained our 71% Trust Index score, a measurement achieved as part of the Great Place to Work surveys across all our employees. I would like to thank colleagues across the group for their hard work, resilience and commitment during what has been a difficult year in several of our markets.

I will now hand over to Richard to take you through the financial results and outlook in more detail.

Thank you, Frank, and good morning, everyone. As usual, my comments are at constant exchange rates unless otherwise stated.

Group revenue increased by 3.0% in 2025. We delivered underlying revenue growth of 0.4%, with broadly stable volumes and selling prices. Underlying revenue growth improved during the year, growing at 0.9% in the second half compared to 0.2% in the first half. This was supported by new business wins in Q4 in North America and underlying growth across all business areas. Acquisitions contributed 3.3% to revenue growth over the year partially offset by a 0.4% impact from the disposal of our R3 safety business in the U.S.

Now turning to the income statement. Adjusted operating profit for the year was GBP 910 million, a decline of 4.3% compared to 2024. This included an GBP 8 million share-based payment credit following reversal of prior year charges related to awards made in 2023 and 2024, which have been impacted by the group's performance in 2025. Excluding this credit, adjusted operating profit was around GBP 902 million, and operating margin was 7.6% compared to 8.3% in 2024. Overall, group operating margin was impacted significantly by the margin decline seen in our distribution business in North America due to execution issues in challenging end markets and the resulting customer price pressure. In addition, margin was impacted by market headwinds in other businesses in North America and in Brazil, particularly in the second half of the year.

Finally, our cleaning & hygiene business in France, which saw ongoing deflation in the first half of the year, where selling price pressure has followed significant product cost inflation during the pandemic.

The operating margin reduction was driven by a decline in underlying gross margin, although gross margin overall was supported by acquisitions and unchanged at 28.8%. An increase in the operating cost to sales ratio from 20.5% to 21.1% is largely driven by acquisitions and reflective of their business models. Excluding acquisitions, the operating cost to sales ratio was broadly stable, supported by cost initiatives as well as the share-based payment credit.

Moving down to P&L. Adjusted net finance expense increased by GBP 20 million to GBP 123 million, mainly due to higher average debt. The effective tax rate was 26% compared to 25.5% last year, reflecting the absence of one-off benefits from U.K. group relief and tax provision changes included in 2024.

Adjusted earnings per share fell by 5.2% to 179.3p. The higher tax rate and increased interest charge more than offset the benefit of a reduced average share count reflective of the share buybacks in '24 and '25. We saw a moderation of the group's adjusted operating margin decline in the second half, in line with our expectations set out in April 2025.

As the chart in the top left shows, our margin was down 0.9 percentage points year-on-year in the first half and was down only 0.4 percentage points in the second half. As outlined in the table, the key drivers of the year-on-year improvement in the second half were the U.K. and Ireland, where margin increased 0.6 percentage points in the second half driven by the good performance of our foodservice businesses supported by strong Nisbets synergies.

Continental Europe, where easier comparatives and benefits from actions taken have helped stabilize margins year-on-year in the second half, and a good moderation of the margin decline in North America distribution driven by actions taken despite an increasingly difficult market backdrop. Within North America, progress in H2 was offset by increased weakness in our Mexico processor and convenience store businesses. Our safety, retail and Canadian businesses, however, were less negatively affected. Market softness in Brazil has also impacted margin progress in rest of the world.

Turning to inflation dynamics. We continue to see pockets of selling price deflation over the year, particularly in our clean & hygiene businesses in France and the U.K., although there was some moderation during the year. However, towards the end of the year, the group saw slight net price inflation driven by tariff-related price increases in North America. Overall, selling prices were broadly stable for 2025, and we expect this to continue in 2026.

The group saw more normal levels of operating cost inflation over 2025. People costs, which account for around 50% of our operating costs and wage inflation was at more typical levels. Fuel and freight accounts were around 15% of our operating costs and were well managed over the year supported by the annualization of contract retendering in North America.

Property leases are around 10% of our operating costs with inflation linked to renewals starting to moderate after recent high levels. We have a continued focus on operating cost efficiencies across the group going into 2026 and expect operating cost inflation to remain in line with typical levels.

Turning to business area performance. In North America, underlying revenue was broadly stable with the decline at constant exchange rates largely driven by the disposal of R3 Safety. Adjusted operating profit decreased by 11.5% to GBP 441 million, with operating margin at 7.0%, down from 7.9% in the prior year. This was driven by underlying margin decline in our distribution business, and the wider market dynamics, as indicated previously. The decline also strongly impacted the return on average operating capital.

The tariff-related selling price inflation seen in our safety businesses in the second half was offset by volume decline resulting from uncertain economic backdrop. Revenue in Continental Europe, however, grew by 2.5%, driven by the benefit of acquisitions with stable underlying revenue growth. Adjusted operating profit decreased by 3.6% to GBP 205 million, with a decline in operating margin from 8.9% to 8.4%.

Despite resilient performance in the Netherlands and Spain and the benefit of acquisitions, operating margin was largely impacted by our performance in France. Encouragingly, France delivered a more stable performance in the second half as did Continental Europe overall.

Very strong revenue growth in U.K. and Ireland has been driven by our acquisition of Nisbets, which completed in May 2024 and was supported by moderate underlying volume growth. Our cleaning & hygiene and care businesses were impacted by continued deflation, although this was more than offset by a good performance in our existing foodservice businesses which delivered strong results, especially in the second half of the year.

The reduction in operating margin was mostly due to the consolidation of Nisbets, which has a seasonally lower margin in the first half of the year. In the second half of the year, operating margin expanded with Nisbets generating strong operating profit growth with greater-than-expected synergies, in addition, benefits from improved stock management were achieved, improving cash generation.

Within Rest of the world, Asia Pacific delivered very strong revenue and profit growth supported by both acquisitions and performance of existing businesses, especially in the health care sector.

Trading in Brazil has been difficult since the second quarter as we face challenges in passing through currency-related cost increases to customers in a weaker market. Whilst Brazil achieved underlying revenue growth and benefit from acquisitions, these dynamics strongly impacted its operating margin.

Moving to cash flow. Cash conversion over the period remained strong at 95%. We generated GBP 579 million of free cash flow, a 9% decline year-on-year, reflective of lower adjusted operating profit although free cash flow grew in the second half of the year as working capital management improved.

During the period, we paid out GBP 242 million in dividends and made a net payment of GBP 40 million to buy shares for our employee benefit trust, leaving total cash generation prior to acquisitions, disposals and share buybacks of GBP 296 million. A net GBP 17 million inflow from the disposal of R3 safety. Cash outflow related to acquisitions was GBP 145 million. In addition, we had outflow of GBP 205 million related to our share buyback program.

Turning to the balance sheet. Working capital increased by GBP 78 million, mainly due to reduction in payables related to the payment of share buyback commitments. Deferred consideration related to acquisitions decreased by GBP 33 million to GBP 226 million. Inclusive of off-balance sheet components, deferred and contingent consideration was GBP 279 million compared to GBP 375 million at the end of 2024. The reduction is driven by a reduced expectation for future payments for some acquisitions, including Nisbets and payments made in the period.

We took an impairment of GBP 11 million in the year related to a business, which has seen more negative trading since it was acquired during the pandemic, at a point where performance benefited from demand for COVID products, which has since normalized.

Our adjusted net debt to EBITDA was 2.0x compared to 1.8x at the end of 2024. This headline ratio continues to exclude the impact of leases and the increase largely reflects the reduction in EBITDA in 2025. Returns have been impacted by our profit performance over the period with a return on invested capital of 13% and a return on average operating capital of 37%.

Our leverage is now within our target range of 2 to 2.5x adjusted net debt to EBITDA albeit at the lower end. Our strong cash generation supports capital allocation opportunities and our priorities remain unchanged: one, to invest in businesses to support organic growth and operational efficiencies; two, to pay a progressive dividend; three, to self-fund value-accretive acquisitions, supported by our strong track record and the attractive valuations and returns we can achieve; and four, to distribute any excess cash. While currently, we see the greatest value in delivering bolt-on M&A, we will actively review our priorities throughout the year.

In the 21 years up to and including 2025, Bunzl has committed GBP 6.2 billion in acquisitions to support the growth strategy that has delivered an adjusted earnings per share CAGR of circa 9% and has returned GBP 3.1 billion to shareholders through dividends and share buybacks. As part of our capital allocation framework, we commit to a progressive dividend policy and have delivered a dividend per share CAGR of circa 9% since 1992. Today, we have announced an increase of 0.3% in our total dividend, a continuation of annual growth. Our dividend cover was 2.4x in 2025 compared to 2.6x in 2024.

Looking ahead to 2026, our outlook is unchanged. And we expect profit to be more stable. We note that our outlook is set at a time of significant uncertainties relating to economic and geopolitical landscape. We expect moderate revenue growth in 2026 driven by some underlying revenue growth and a small benefit from announced acquisitions.

We are anticipating slight volume growth from improved performance and expected business wins despite challenging markets and a broadly neutral selling price environment. Alongside this, we expect typical levels of operating cost inflation of around 2% to 3%, which we expect to be partially offset by operating cost and sourcing initiatives, including the annualization of Nisbets synergies.

As a result, we expect operating margin to be slightly down year-on-year versus the 7.6% in 2025, excluding the share-based payment credit. While recognizing the significant uncertainties mentioned previously, we expect a more normalized weighting of adjusted operating profit between the first and second half. We also expect a net finance charge of GBP 125 million and a tax rate of 26%.

And I will now hand you back over to Frank to take you through our strategy update.

Thank you, Richard. I will give a brief update on our key strategic priorities, which will support 2026 being the year in which we expect to deliver organic profit growth and support long-term compounding growth. Our long-term strategy remains unchanged. We are focusing on driving profitable organic growth, complemented by disciplined value-accretive acquisitions. We also continued to drive operating efficiencies and strong cash generation, which supports a progressive dividend and where appropriate, additional returns of capital. Organic revenue growth opportunities are supported by our differentiated customer proposition.

A good example of this is our long-standing relationship with Wegmans, a fast-growing grocery chain in the U.S. We have recently moved from being 1 of 2 distributors to becoming their sole supplier of goods not for resale. This materially increases our share of business with the grocer. There are several factors behind this successful expansion, including our recent organizational model change in distribution. Firstly, our long-term track record of reliability and service quality. In 2025, we delivered a full range of 99% for Wegmans.

Secondly, our own brand development and our ability to innovate across new product lines, helping our customers manage costs while maintaining quality. The new categories we have won will be supported to our own brand offering, and we expect to see a strong increase in own brand penetration with this customer.

Thirdly, our single IT system, which uniquely positions Bunzl to provide consolidated data and supports better customer decision-making.

Fourthly, our sustainability expertise which continues to be an increasingly important differentiator and delivers commercial benefits to our customers. And finally, our ability and commitment to onboard large programs with no disruption. This is critical when ensuring the timely delivery of essential items to customers.

Acquisitions represent a significant opportunity for Bunzl as we operate in large but fragmented markets. Since 2004, we have completed over 230 acquisitions and spent over GBP 6 billion. Our pipeline remains active and extensive with over 1,300 potential targets identified across countries and customer end markets and bolt-on acquisitions continue to be our focus. We're a good home for these businesses, providing them with opportunities to enhance their offering to customers and leverage Bunzl scale whilst maintaining their entrepreneurial spirit.

Since 2020, we have announced 74 acquisitions with enterprise values below GBP 200 million. We spent an average of GBP 300 million annually on these deals, with an average committed spend of around GBP 25 million. Our balance sheet and cash flow are supportive of an ongoing similar level of annual spend in the coming years. The average multiple that we are paying for these deals has been around 8x operating profit and has remained consistent for the last 10 years. We continue to target paying a range of 6 to 8x depending on the specifics of the individual businesses.

Bolt-on deals typically deliver a return on invested capital well ahead of their project WACCs quickly, and recent deals have demonstrated a year 2 return on invested capital of 13.3%. Alongside acquisitions, we continue to maintain strong portfolio discipline. Since 2022, we have completed 4 disposals, including the sale of R3 safety in the U.S. in 2025. These businesses had relatively low margins and their disposal improves the overall quality and focus of the group.

As I mentioned earlier, we completed 8 acquisitions in 2025, although on average, these were on the smaller side. Despite an active pipeline and ongoing conversations with attractive targets, our spend was at the lower end compared to our recent history, driven by the macroeconomic environment. Historically, acquisition activity has picked up quickly, and we expect an improved year for acquisitions in 2026.

I also want to give an update on Nisbets after its first full year of trading as part of Bunzl. Nisbets is a leading and scaled distributor of catering equipment and consumables and is a strong addition to the Bunzl portfolio. Whilst it had a more challenging start, given a weaker market and ongoing optimization of an automation investment made prior to the acquisition, I am pleased to see the business deliver an improvement in performance in the second half of 2025. This has been supported by strongly enhanced inventory management processes resulting in improved availability, reduced working capital and reduced storage costs.

Furthermore, we have delivered significant and better-than-expected synergies related to predominantly to third-party logistics as well as procurement savings. Overall, the business is expected to see its return on invested capital, meet the required project WACC around year 4, which is consistent with our expectations at the time of acquisition. Whilst this reflects slightly lower than previously anticipated earnings in year 4, it also reflects the reduced deferred consideration to be paid. Our disciplined approach to valuation and integration remains unchanged.

Operational efficiency remains a core pillar of our strategy, and we continue to make incremental improvements across the group. Over the year, we completed 36 warehouse consolidations and relocations. This is a material increase compared to an average of 19 over the previous 3 years.

Automation projects are a further example of potential opportunities. In one of our largest warehouses in the Nordics, we are implementing an automated picking system supported by robots, which is expected to double productivity compared to manual picking. In one of our German warehouses, we are automating 60% of order lines, which is expected to increase productivity by around 30%. These examples continue to demonstrate how Bunzl reviews opportunities on a case-by-case basis as there is no one solution that suits all.

Stepping back, Bunzl has a resilient Bunzl business model with a value-added customer offering supported by our global scale, which will continue to underpin our performance in the longer term. We have a very strong proposition for our customers. Our product expertise and value-added services, including our sustainability capabilities, deliver commercial benefits to our customers that set us apart from competitors. This is supported by our global reach and scale where we leverage investments across the group.

Furthermore, our robust supply chain with more than 15,000 supplier relationship strongly supports our reliability. These areas of strength are complemented by a decentralized model, which allows for local market responsiveness and an entrepreneurial approach. Ultimately, our focus on low-cost essential products and services is the foundation of our resilience and supports very sticky customer relationships. Alongside strong cash generation and high returns, this model and our positioning will continue to provide a robust foundation for long-term growth.

Before we move to Q&A, let me summarize the key takeaways. Decisive actions across the group have improved performance and supported the moderation of margin decline in the second half. We expect some underlying revenue growth in 2026 and a more stable adjusted operating profit to provide a foundation for future organic profit growth. We continue to see significant opportunity for further consolidation, and our business fundamentals remain attractive. And I remain confident in realizing the group's medium-term growth opportunity.

Thank you for your attention. We are happy to take your questions.

Rory?

It's Rory McKenzie from UBS. Firstly, on the new business wins you called out in the slides, I think they added up to about 1% of sales in itself, which actually is quite a lot for Bunzl. So have your sales teams been more proactively targeting larger accounts or tenders? What does the pipeline look like there? And also, can you talk about what headwinds you're facing that offset some of that growth in some markets? Just trying to get a sense of how growth kind of could phase through this year.

And then secondly, thanks for giving the gross margin figure today, stable on last year at 28.8%. Within that, can you comment on the M&A contribution? Did Nisbets add about 50 basis points or more or less? And then can you just talk through the pressures versus tailwinds driving that reduction in the underlying gross margin, please?

Okay. Let me take the first question, you take the second. In terms of new business wins, so yes, so we saw some good wins in -- during the second half in North America in the distribution business, which was encouraging because this really goes back to why did we make that organization model change. Initially, during 2024, '25, we saw some issues around agility in the local business. Now it feels like we're seeing more of the benefits from the new model in terms of having more focused sales team. So the pipeline is being very actively managed, not only in distribution but also in areas like Continental Europe, for instance. So that's fair that there's more focus on that.

In terms of the headwinds, I would say I think all the things that we can control, we made good progress in. The one thing that we can't control is the market and the levels of wars that are starting around this. So that's the thing we don't control, and we'll have to see how that pans out.

So on gross margin, as you say, flat at 28.8% overall, but down slightly when you look at underlying. The best way to think of this is that essentially gross margin decline has driven our operating profit -- operating margin decline. The 2 numbers are not that different. So that's, I think, the first part of your question.

As to pressures versus tailwinds, look, I think what we've seen throughout the year, as we've gone through 2025 is that the market has been more -- become more and more difficult. And that could be in foodservice in North America, it could be in our processor business, it could be in our convenience store business or it could be the effect of the U.S. challenges to the rest of the world. We've seen that, I think, more generally.

So what that tends to mean is you see, even though we don't see a change in the overall competitive environment, you've got the same competitors fighting for lower volumes. So inevitably, there's a degree of price pressure which flows from that. I think we've seen that in -- certainly in North America and also across the world.

As the tailwinds, look, it's good to see own brands up at 30%. We are taking a slightly more measured approach in the U.S., as Frank talked about. We still think there's opportunity. But also, we will be taking every opportunity to continue to buy better. I mean the cost of sales is our biggest single product. The best way we can grow to grow profits and offset any margin pressures is to buy better and then -- and ideally hold on to those prices where we can. So the 2 combined, I would see as the pluses and minuses.

Suhasini?

Suhasini from Goldman Sachs. Just a couple for me, please. Is it possible to give some color on how early trading year-to-date has been? Given the new business wins that you won at the end of last year, it felt like momentum was maybe a little more positive heading into the beginning of the year.

And when I think about the SG&A, I think on the cost side, you have taken some one-off costs above the line. You've also done warehouse consolidations that have been completed in Europe. Can you help us quantify the net benefit to SG&A potentially? We can obviously work out margins after the revenues are done for 2026.

Yes. So if I think of -- look, in terms of early trading, I would say January is the -- is all we've seen in terms of profit trading. It's the lowest month of the year. So you need to keep that in mind. But against that context, we are seeing trends that are consistent with what we're guiding to. So -- but it is against the context of a very -- a typically low starting point.

We did see momentum in Q4 in the revenue growth. I would caution though, because I think that is largely seasonally driven. So we do tend to see this where you have businesses which are very much servicing at Christmas peak, like our distribution business in North America, our retail businesses globally, it doesn't necessarily translate and you see that landing in January. It just doesn't tend to happen that way.

As to SG&A, so yes, Bunzl always takes the cost of any change within our numbers. There's no separate lines pulled out at all. It is also fair to say we don't tend to see big restructuring activity, which could create big numbers. The change in France that we've been talking about by consolidating warehouses, we took some of that cost in 2024, and there were some property profits at the time, which broadly offset it. If I look to 2025, there are some one-off costs that hit us in the year, particularly around the activity levels we took in place in North America. You should think of those as low single-digit numbers. And therefore, I don't really see there being much of a benefit when it comes to 2026.

Annelies?

Annelies Vermeulen from Morgan Stanley. Just going back to your own brand strategy, you touched on this in some of the earlier comments, Richard. But how are you implementing that this year? And how is that -- what kind of progress do you expect to make with your own brand, particularly in North America over the course of '26?

And then secondly, just on -- you mentioned a write-down of an impairment on a business that you bought during COVID. Is that a one-off in nature? Or is there -- are there other parts of the business where that could also be the case? And as part of that, could you also perhaps talk about disposals and if there's anything else we should expect in the next year or so?

Yes, let me take the own brand. So yes, we're very pleased with the own brand progress we have made. Still a good opportunity there because we have overall -- we moved from 28% to 30%. So the way to think about this is, of the overall level of cost of sales, 30% is in own brand, then we have a level of preferred branded supply spend that we want to grow, and we want to continue to push forward. But then there's quite a big piece in the middle that is still up for grabs, basically.

And to give a very simple example, when we sell products to our customers, you have people who ask for Kleenex tissues because it's a brand and it's from Kimberly-Clark, obviously, and we're gladly delivering that with a margin. But a lot of the products also have the nature of, let's say, a plastic or a paper straw. And if I would ask you, what is the supplier of a straw, you wouldn't know that's like the equipment of a Kimberly because these things are being provided by importer or suppliers that have -- people have no brand recognition, no salespeople in the field. So these kind of products are still, for us, a potential area to further own brand without any possible conflict.

So certainly, in our distribution business, we are much more mindful of what we're doing on own brands. Really sort of reengage and reenergize the supplier relationships. They are very keen. In January, we had a big promotion called [ Jan Sanity ], which is around January and [ Jensen ] products, cleaning hygiene products.

So it's a lot more engagement sort of on a local level, but also centrally. So in summary, we expect own brand to develop in a gradual way. It still depends a little bit on the mix of acquisitions going forward. As I said before, if we would only buy safety businesses that have almost 100% on brand that obviously will drive the own brand up quicker, but that really depends on what is going to happen. So I still feel good about the potential to further develop, but the 30% is a nice level already.

And on the impairments, I mean, this doesn't happen very often, thankfully. And I think this is a particular case in point where we acquired this business during the height of COVID when we knew there were some COVID products in there, but it was not as clear that the level of COVID products that they were benefiting from would ultimately continue. It hasn't continued.

And as a result, we've had to reflect that in our carrying value. That said, this is still a decent business, and I think there is opportunity here for us to -- whilst technically, we have to do this, this business still has opportunity to grow. And our teams are very, very focused on making sure it does exactly that. But look, it is -- I do think of it as a one-off. I look around the rest of the estate, I don't see anything in a similar position.

As to disposals, well, look, we've seen us do, I think, 4 disposals in the last few years, GBP 250 million of revenue. It is part of how we think about the portfolio. If there are businesses which for whatever reason the market has changed or whatever has happened, but ultimately we see as having a more valuable home elsewhere, we may consider it. We obviously always want to make sure we try and fix and improve these businesses first. But in certain cases, as you've seen with the 4 that we've done, that can happen. I think you should assume this is housekeeping, and we carry on doing exactly the same.

David?

It's David Brockton from Deutsche Bank. Can I ask 2, please? One, specifically in relation to the U.S. local business, and secondly, in respect of CapEx. When you rebased guidance in April, I think you indicated that you felt it would take 2 years to get that U.S. local foodservice business back to where it should be. Do you still stand by that? And can you confidently assert that some of the issues you've had there are now behind that business just purely for the local side?

And then secondly, in relation to the CapEx, that number has trended up quite materially over the year against relatively flat revenue, which I presume is property consolidation related. But can you just touch through what's happening there and how we should think about that going forward?

Yes. So let me take the first question. So yes, on the local business, in the U.S. distribution business, 3 things happened. And that was my objective when I went in. You remember me saying, listen, I know what needs to happen, I'll fix it. And we focused on 3 things. Service levels, and I always say to our management also, there's really 3 things that are important in distribution. That's on time in full service deliveries, so which is delivering on time what people ask. Number one is service levels, number two is service levels and number three is service levels. So our service levels are back to their historical levels.

So we are in a good position. The local agility has returned. So the salespeople have the cost that they need. If they want to bring in products, they can bring in products. If they want to change suppliers with the local management, they can do that. So that's been restored. And then obviously, the last thing is the people motivation, that people need to be excited. They need to score. They need to go out and sell. So significant progress has been made in terms of these leading indicators, which is important. So the business locally operates much better. I think we fixed that probably faster than I expected it given the size of the company, this is like almost a $5 billion business in total.

What obviously takes time is, let's say, the winning back element. And the good thing is, in most cases, we have retained the customer because this is food redistribution. So they buy a lot of categories. And in some areas, we've lost some categories during that process. And that takes time to win back over time. We won't win everything back, but we also win some other stuff like we talked about GBP 100 million that we won in food redistribution but also in grocery. So very pleased around the progress we are making. I set the bar very high. So I won't let go before it operates much better than it used to be, but we are well positioned to go out and win.

And on CapEx, David, look, yes, it is high in 2025, and that's driven by 2 things really. Warehouse consolidations in France that we talked about, but we're taking -- and this is our biggest cleaning & hygiene business, taking warehouse account from 15 down to 6. About -- that was about 15 down to 9 within 2025. And this requires us to -- there's a chunk of fit-out cost that goes into standing up the new site, particularly the one outside Paris. And we're doing something similar -- slightly different, but similar in Memphis in our safety business, our biggest safety business, MCR, who's a big extension that we're doing that will allow us to consolidate some other warehouses into it in the year. Both are going very well. We've also had some of the investments we talked about in Denmark as well. So you can think of this as being unusually high. It will reduce down to more normal levels in 2026 and beyond.

Sanjay?

Sanjay Vidyarthi, Panmure Liberum. I had 2 from me as well, please. First one, in terms of the phasing of EBIT margin in the U.K. in '26. Obviously, there's a big uplift in the second half of '25. Should we see the synergies from Nisbets offsetting the kind of the seasonal weakness you have there and so more kind of balanced in '26, H1, H2?

And then second question, in terms of deferred consideration, you mentioned lower expectations for the year ahead. Could you give any guidance for '26 and '27 cash costs for deferred consideration, please?

Yes, guess this is mine. So phasing -- so if you think about 2026, we -- I think we've talked about in the statement that we expect a more normalized profit contribution from first half, second half. And I think you should think of the -- when you search for what that means, I would look pre-COVID has been a more indicative period. COVID's been a highly disturbed time when a lot of the normal trends have changed. So I think that's the starting point, Sanjay. Within that, actually, the regional shifts are not that different. So they're broadly the same. We do expect margins to be, I'd say, flat, maybe slightly up for the first half and therefore, the offset in the second half, given that we're guiding down slightly.

Specifically to Nisbets, yes, there is an annualization to come on some of the Nisbets synergies. They've actually done an extremely good job in generating synergies, not only within Nisbets, but also flowing back into our other foodservice businesses in the U.K. and Ireland. And so we're pleased with that. I think that's within the wrapper of what I've just said. So it won't specifically change the overall group number. From a U.K. perspective, though, I think you should still expect that phasing to be certainly more second half and first half weighted because January and February for Nisbets is a quiet time, I mean, for a lot of food service businesses.

As to deferred consideration, we give -- we do give a phasing of time scales on the cash outflow in the statement. But broadly, you can expect a lion's share of that total cash outflow will land in '27 and '28. There'll be a bit in '26, sort of low to mid-10s, but the rest will come in '27, '28.

Jane?

Jane Sparrow, JPMorgan. Just one for me on the pricing outlook. I know you're guiding broadly stable. But can you comment on within that, whether you're expecting continued deflation in the cleaning & hygiene business? Just trying to understand where you are in the air coming out of that? And if that is coming down, if where else it's being offset by inflation?

Yes. Look, I think we -- so we enter the year seeing a benign outlook for input prices. We're not really seeing any big shifts in paper or plastics or anything else. So then when thinking about '25, '26, then you're to think about the full year effect of '25. There should be some benefit from tariffs given that we put tariffs through in Q2 last year, there will be at -- let's say, a quarter's benefit in 2026. We have seen -- we do see continued deflation in cleaning & hygiene businesses, but it did moderate through the year. So I think there's probably a bit of that as well.

Now obviously, the changes -- there's 2 things that aren't included in our guidance from what we've seen more recently, the Supreme Court ruling on tariffs. It's still very early for us to understand what that really means as to how this plays out and indeed, how the refund process works, should there be one. And of course, all that we've seen over the weekend and any changes to oil prices or gas prices driving plastics prices, yet to be seen. Obviously, there would be a lag in any event between the base, the substrate level and the finished goods. So I would imagine if it does -- if we do see something, it will be later in the year.

Okay, no more question. Well, thank you for attending the presentation.

Thanks.

Good morning, and thank you for joining. As we head towards the end of a challenging year and look forward to 2026, we hope you find having a call helpful. I'll make a few brief remarks regarding our preclose trading update before opening up for questions.

Firstly, on 2025. Despite challenging end markets, I'm pleased to say we expect to achieve an adjusted operating profit in line with guidance we set out in April this year. Within this, we expect underlying revenue to be broadly flat. Despite the tougher comparatives, we expect to see good momentum in the final quarter, supported by the benefits of actions taken to improve our performance, including new business wins in North America. This recent performance is encouraging, and volume growth is slightly better than we had anticipated.

Alongside the support of acquisitions, we expect group revenue growth over the year to be between 2% and 3% at constant exchange rates. We expect operating margin to be around 7.6% compared to 8.3% in the prior year, but expect to demonstrate a moderation in year-on-year operating margin decline in the second half as outlined in our guidance. This moderation is driven by the benefits of actions taken in North America and Continental Europe to improve performance, easier comparatives in Continental Europe and Nisbets synergy benefits. We also completed our GBP 200 million share buyback at the end of October, and continue to expect leverage to be just over 2x.

While we still have to complete 2025, we present our initial view of 2026 against the backdrop of ongoing macro challenges and uncertainties. In doing so, we set our expectations for a more stable profit outlook. We expect to deliver positive organic growth in 2026, supported by the actions we are taking to improve performance across North America and Continental Europe, including our focus on new business wins. The ongoing challenging market backdrop holds back our expectations of further volume progress at this stage. And as we said in April, the benefit of some actions that are expected to extend well into 2026. In addition, although the pressure of deflation is now eased, our current expectation is for pricing to remain broadly neutral over the year. Overall, we expect some underlying revenue growth, and for this to be complemented by a slight benefit from acquisitions announced already, including the acquisition of Damito. Taken together, we expect moderate revenue growth over the year at constant exchange rates.

The group operating margin is expected to be slightly down year-on-year. This slight decline is driven by the ongoing market challenges which moderate our expectations of underlying revenue growth, and therefore, our ability to fully absorb the impact on margin from operating cost growth. We expect operating cost inflation to be at more typical levels and have in place strong cost-saving initiatives, in addition to the ones made in 2025. Overall, we expect these initiatives to only partially offset operating cost growth. Furthermore, we expect the impact of new business wins, which support our volume growth expectations, to typically be margin dilutive at the start of a contract.

Before I open for Q&A, I want to highlight that our acquisition pipeline remains active. In 2025, we expect to commit around GBP 140 million to acquisitions. It is not unusual for periods of high macroeconomic uncertainty to drive slower level of activity, and we are looking forward to a better year for completed acquisitions in 2026.

With that, I'm happy to take any of your questions.

[Operator Instructions] Our first question is from Annelies Vermeulen from Morgan Stanley.

I have 3 questions, please. So firstly, if you could quantify your underlying revenue growth in Q4 and how that developed relative to Q3? And if there was any changes in the mix of price and volume within that?

Then on -- secondly on -- you're expecting some underlying revenue growth for 2026. Could you talk a little bit more about how your expectations of your -- how your end markets will grow and your expected performance relative to those underlying markets?

And then just lastly, on the M&A spend, if you could quantify your year-to-date M&A spend and what gives you that confidence in that improved spend level for next year?

Yes, Annelies. So if we look at Q4 2025, well, I think we've got some good momentum in the quarter against what have been tough comparatives last year. So actually, the print for Q4, we expect to be better than we had anticipated. Broadly flat means slight -- broadly flat to the slight -- to the positive, very slightly, which should mean a positive number for Q4 -- slightly positive in Q4, which, given how strong last year was, that I think is a positive.

If we -- in terms of underlying growth for 2026 -- so yes, we're talking about some return to organic growth, which is important. And you can assume that, that is essentially volume-related growth because we are seeing a more neutral inflationary environment. I mean there is some inflation around in North America. It's tariff-driven, and it's the full year effect effectively of what we saw in 2025. But there are some pockets of deflation that lead us to a position where we think actually to start the year, it's better to be neutral in our outlook for inflation. I think that's the better place to be. So it does mean the volume growth -- what is the growth we're seeing in '26 is volume driven. It will be -- we expect at this stage that it is a bit less than a real GDP read. But I think that is mainly because we have some more challenging markets in North America, particularly foodservice and the subdued grocery market, which effectively holds that back a bit.

In terms of 2025 spend, we committed GBP 140 million in 2025 to acquisitions. That clearly is a low year for us. And when we look into 2026, whilst owner-managed businesses and families may well be able to defer selling businesses for a period of time by 2025, I think generally, we expect and see that in the following year or thereafter, activity levels pick up. And the pipeline is good. So I think there's plenty of more opportunity in 2026.

The next question is from Simona Sarli of Bank of America.

Richard, could you please elaborate a little bit more on the progress that you're making with the initiatives in North America? And also elaborate a little bit more on the margin decline expected in 2026 or so? You said that it's mostly related to cost inflation, but can you please talk a little bit more about trends across the different geographies?

Yes, Simona. Look, I think we're pleased with the actions and the progress we're seeing on the improvements we're making in North America. It's obviously been a challenging year, but a lot of the actions we took earlier in the year, I think, have set us up well for 2026 and beyond. We've taken a lot of cost out. I think the own brand launches we saw in Q2, and particularly Q3 where we did -- where we had the right level of inventory to service those own brand launches. Those together, I think, have been positive. Service levels are definitely back to where they should be. And importantly, I think we're seeing an improved level of engagement and motivation from our business, particularly the sales team. So I think that what we set out to achieve in 2025, which is very much to stabilize and make significant improvements in the business, have been delivered.

As we look into 2026, we have to recognize, well -- and true for '25 as well, we will have achieved '25 numbers despite the fact that the market in the U.S., in particular, has been really quite difficult. And that's particularly true for foodservice. You will have seen plenty of data points coming out of the North American foodservice scene that can support that. So we've achieved this despite that. And I think it was important we made these improvements because it has been a difficult marketplace to be, but I think that helps us as we go into next year.

And your point on margin decline in '26. Look, there are a few things. A, it's a slight reduction. So keep that in mind and context. B, there are quite a few things happening here. One, we are -- largely because of the subdued markets, we -- that is holding back what we -- our ability to grow volume in this period. It's good to see we are going to get volume growth, but it is a bit lower than I think we would normally expect in part because of those headwinds in the markets. So that's one thing.

The lack of inflation in our selling prices is also another. And that means that when we have OpEx inflation like we do have and will have, then we're not -- there's a lot of natural offset in our top line at this point given where those prices are sitting. It does, therefore, mean that we have to be very good at taking out cost within our operating costs to offset the increases in inflation we're seeing. And that -- increases in inflation are the sort of 2% to 3% range. So back to a level that's more typical, but still requires us to offset them. At this stage, we're not going to fully offset those cost increases. And as a result, that's part of the bridge towards a slight margin down. Alongside, of course, we are winning business typically at lower margins at the beginning of the contract, which will also play into that.

Can I just ask one more question, please? Can you elaborate a little bit more on the evolution of the competitive landscape in North America? So considering that volume remained quite weak and you have still, in some pockets of the market, there's some deflationary pressure on pricing. Do you see overall the competitive landscape having become more aggressive? And if you can differentiate it between what you see between large customers and SMEs?

Yes. I think the -- this has always been a competitive environment. I don't think we're seeing any real change in the competitive landscape. Pricing is always a factor. I mean, we add a lot of extra value and provide value-added services, which mean that ultimately, it's not just price, but clearly, it's a factor. But no real change in the environment as such. I think that the end markets being more pressured doesn't help that, and that's part of what we're showing in a slightly lower margin. But our job is to win business here. And I think we've made good progress in Q4, particularly in North America, but also in Continental Europe where we're starting to see a much better pipeline emerge. And I think that's the route to offset any potential pressures, which is to grow volume.

Our next question is from David Brockton at Deutsche Bank.

Two questions, please. One, just on the language that you used around margins for next year. Can you just confirm -- I'm trying to understand, what you're saying is slightly less than moderate? I know you guided to margins being moderately down in 2025 and then slightly down in '26. So we just basically modeling that 2% to 3% OpEx with maybe circa 1% on the top line and so a much lower level of margin degradation?

And then secondly, in terms of deflation in Europe, you touched on that there are still some pockets of deflation. One, is that Europe? And two, are there any product categories that relates to?

David, yes. Look, we're guiding for 2025 to be around 7.6% and slightly down in 2026 on [ 25 ]. So I mean, you should think of that as very slight, really. So not -- it's sort of around 10 bps probably that sort of level, I mean broadly, that sort of level. So it is a slight change, and it does reflect that the bridge that I talked around, around good top line growth to some degree, but held back by a lack of inflation and OpEx growth that we can't fully offset at this stage. So the mixture of those, I think, get you there. But overall, a slight margin downgrade.

In terms of pricing, yes, we're seeing -- so inflationary in North America is largely -- it's largely tariff related, particularly in our safety businesses, the full year effect of that into 2026. Yes, some pockets of deflation. We're anticipating some pockets of deflation. We're not actually seeing deflation yet in our European operations. And here, we're probably -- we're mainly talking about paper prices. And we hear a lot about it, but we're not hearing it from suppliers at the moment. I think it's reasonable to assume as we start the year, a neutral pricing level given the potential ups and downs that we see.

The next question is from Karl Green at RBC.

I've got 3, hopefully, 2 of them quite quick. Just firstly, on the new business wins and the impact of them as they ramp up on the margins. Could you just, again, just very basic terms, explain when you would expect the margins on that business to actually normalize or get to kind of target levels? And what's driving that in terms of implementation costs?

The second one is just around the Nisbets synergies. Can you indicate what the net synergies were in '25 and the expectation for net synergies in '26?

And then the last one, just in terms of your logistics costs and specifically driver salaries and wages, are you seeing any impact in North America from the ICE crackdown on unvetted drivers, please.

Karl, yes. So look, it is typical for us to win new business at lower margins than would be what we would expect or hope for. But it's also quite -- it's normal for us to then walk that margin up over time by substituting products, changing specs, introducing own brands, maybe changing the prices here or there. That's very much a normal course of business in the industry and for us. How long does it take? Well, you can assume we're on it straight away. So it's -- we want to make sure we -- that happens as soon as sensibly possible. I would imagine a couple of years' time would be -- over a couple of years would be a sensible runway to think about -- to getting us back to what we see as a normalized margin.

As for Nisbets, we have seen -- yes, I think the second half of 2025, we'll see a step-up in the benefits of synergies in -- from the combination with Nisbets. It's not only sitting in the Nisbets business. There are synergies that flow into Lockhart and our business in Ireland and potentially in Australia as well. But there is -- but we will see that in the second half of this year. We will then get a full year effect into 2026. Now at this stage, I'll hold back on giving you the numbers. We can come back to that when we get the full year, and we have -- and we can see the full outturn. But certainly, second half weighted '25, full year effect '26.

Drivers and warehouse costs in North America, we -- actually, these have normalized quite significantly in terms of the level of inflation we're seeing, which is helpful. I'm not aware of us having any issues with drivers in North America relating to the ICE crack down. Certainly, that's been an issue for some of the end markets we serve. Food service, in particular, has been affected by people not turning in for work for fear of being deported. So I think that's part of -- I can see it in that space. I'm not seeing it in our own business at this stage in our own driver community.

[Operator Instructions] We have a follow-up from Simona Sarli at Bank of America.

Richard, one more from my side. Could you talk a little bit about momentum in white label products? So in percentage terms, how much they are contributing in 2025 versus 2024? And what is your expectation for 2026?

Yes. So look, I think 2025, we'll -- I'd probably give you a better steer on that when we get to the end of the year fully, but we are expecting to be around between 28% and 30% in 2025, something in that order. Obviously, a big step-up from where we were in 2019, where it was more like around 20%. That's been across the group in terms of safety growth, but also more recently, of course, the growth of own brand in our North American distribution business.

As we go into '26, look, I think you should expect a more measured approach. I don't know yet where we're going to be for '26, but you should assume that there will be some improvement, but perhaps not the same level we've seen in the last couple of years. Still an important part of what we do, but we've got to -- particularly in North America, there's a lot of absorbing of the launches we've already done that needs to take place and to happen, make sure that we properly follow through on the delivery of ones we've done before we necessarily do too many more. But there will be some more in '26, but probably a more measured pace.

But does that mean that in terms of revenue contribution, should I assume to be flat, let's say, compared to 2025, or potentially down?

I don't think down. I think -- let's say, flat to begin with, and we can see how that progresses as we go through the year.

And then apologies, one last one. It's more like a technical on the -- can you elaborate on the interest cost expectations for 2025 and 2026?

Yes. We're guiding to 2025 to GBP 120 million of net finance expense. Expect that to be about the same in 2026 as well. We will benefit a bit from lower rates. And while we're there, tax rates, about 26% in 2025 and the same for 2026.

And the similar interest charges in 2026, is that including also M&A that you had in the pipeline? Or it's based on what you have announced so far?

Yes. It's only on what we've announced so far. So you can assume that it benefits from that. We do have a slightly higher level of average net debt as we've gone through this year, which is in part of that bridge.

Our next question is from Will Kirkness at Bernstein.

I'm sorry I missed the very beginning of the call. So hopefully, I won't be repeating anything. I've got 3, please. Firstly, just -- could you quantify the tariff pricing impact you expect to see in the fourth quarter?

Secondly, can you give us any comment on gross margins, where you expect them to be for FY '25?

And then lastly, just conceptually, I think you've spoken before about the margin uplift since 2019 being kind of half M&A, half pricing and inflation benefits, et cetera. But it feels like we've gone beyond giving slightly more than half back now. So I just wondered if you -- how you think about that, I guess, the incremental weakness versus the 2019 position?

Will, the tariff pricing, it's part of the mix for 2025 and it is effectively the -- what the -- the level of inflation we're seeing in North America is really just inflation -- is just tariff driven. So when you think -- when we think of Q4 for 2025, where we're talking about slight positive underlying growth in the quarter, you can assume that Q4 is going to be about -- about half of that's going to be inflation and the other half will be volume. So we are seeing -- so essentially, all of the inflation we're seeing at the moment is really driven by tariffs in North America, and it's contributing half of the underlying growth in Q4, or we expect it to anyway.

In gross margin terms, so yes, as we know, we've seen a significant increase in gross margin in 2019 versus 2025 -- '24 and 2025. I think in 2025, underlying, we'll see a slight decline. But in total, it will be about the same as it was in '24 because we've got the annualization of Nisbets to include. So we had a full year effect of Nisbets, which has a higher natural gross margin, which will mean that total will be about same underlying, slightly down, I'm expecting.

And in the margin uplift versus 2019, so yes, if you compare it to '24, we've talked about for some time now that half of that is M&A, half of it is going to be organic, and of that half organic, a good proportion -- a bigger proportion would be inflation driven. I think in '25, when we've got the final numbers, I think we should still expect to see some level of inflation support in those 2025 margins. So -- but we will be able to give you a better sense for that when we get the full picture at the end of the year.

[Operator Instructions] Okay. We have no further questions on the call. So I'll hand the floor back to Richard for any closing comments.

Thanks for joining us today. I hope you found the call helpful. Look, we're pleased to be meeting our profit expectations for 2025 and to be providing a more stable profit outlook for 2026. And we're working very hard to drive the group's performance in challenging markets, and are encouraged by the operating -- operational improvements being made. Furthermore, we remain confident in the group's underlying resilience and ability to drive consistent compounding growth in the medium term.

I wish you all a restful Christmas and a happy New Year. Thank you very much.

Thank you. This concludes today's conference call, and you may now disconnect.

Good afternoon, and welcome to today's Insight event. I am Andrew Mooney, the Corporate Development Director for Bunzl. Together with my colleagues, Alberto, Oscar and Nicolas, our objective today is to provide you with an understanding of why we excel at delivering value through acquisitions and what makes Bunzl the preferred acquirer for family businesses. I will start with a short presentation on how our acquisition strategy and how our model works. This will be followed by 2 videos. The first, focused on Spain, will give you an in-depth view of our consolidation strategy. The second will give you direct thoughts from some of our entrepreneur sellers. We will then have time for a Q&A session.

Acquisitions have always been part of the Bunzl growth story. With over 230 deals since 2004 and GBP 6 billion of committed spend, acquisitions are at the very heart of our business and everyone in Bunzl is encouraged to look for the next opportunity. Our large and fragmented markets, coupled with strong cash generation, make the compounding model a terrific way for us to invest and grow. The general stickiness of customer relationships also helps. Customers fear the disruption a change of supplier may bring. This makes growth through acquisition an attractive route for us.

Bunzl is now GBP 12 billion in revenue, spans 32 countries and operates in 6 sectors. With our acquisition strategy, having delivered 2/3 of our Group revenue growth over the last 10 years. As an example of how we have grown and developed in a market, I would like to highlight one that's close to my heart. I joined Bunzl in 2000 through the acquisition of its first safety business, Greenham, in the U.K. Since then, through more than 50 acquisitions, we have built a safety sector with a footprint spanning 27 countries and revenue close to GBP 2 billion. We have invested in sector expertise and are now one of the largest safety distributors in the world, providing our customers with essential products plus valuable support and advice on a range of regulations and challenges they face. We are now a significant player in the safety market, but we still have a long way to go. The market remains fragmented, and our share is a low single-digit percentage.

Our expansion in the higher-margin safety sector has not only brought growth in a new market, but has allowed us to leverage brands, especially owned brands, and increase our level of value-added services along with the distribution of product. This example of the safety sector is not unique, and we see significant opportunity across other areas. I frequently say to sellers, we cannot guarantee that Bunzl will make you the highest offer. But what we can promise you is Bunzl will be a great home for your business and your people. These are not just words, they are a reality. We offer decentralized environment where commercial autonomy is assured and entrepreneurs are encouraged to remain agile and to continue growing their businesses.

So what does Bunzl bring along to the party? While family businesses are really good at everything and, utilizing our scale and expertise, we can enhance performance through areas like operational support such as implementing a warehouse management system or even an ERP, planning and managing a move to a warehouse to facilitate expansion, deal expertise to assist entrepreneurs who have developed their own pipeline of acquisition opportunities. These are things we are doing all the time. But for a family business, they can be somewhat daunting and a major hurdle to future growth.

In addition, being part of a group enables targets to benefit from synergies, and the most accessible of these relate to purchasing scale. For those acquisition targets that buy in the Far East, our Asia sourcing function is a real benefit. It not only assists them in finding products at the right price, but aids them considerably in quality assurance and ensuring factory audit compliance. Oh, and did I mention the advantage of our decentralized model? Sellers only realize how respectful we are of what they have built once they've joined the Group. They often have in their mind stories of family businesses being swallowed up by large corporates, and to help them understand the Bunzl reality, I often need to enlist the help of previous sellers who are happy to share their experiences.

One of the questions I am most frequently asked is can Bunzl maintain its acquisition momentum? The answer is simple. It's a definitive yes. Each one of our countries where we have a presence in the sector has a dot. There are nearly as many spaces as there are dots. But what is also important is that the dots only represent a presence in a sector. And in many of our sectors, there is huge potential to grow. If I take Italy, for example, we have a small dot for safety. It is a relatively small business. And if you compare Italy in terms of market penetration to the U.K., based on population, there is a 1 billion opportunity alone. In addition, there are also countries where we do not have a presence yet, places like Sweden and Greece, which also represents significant avenues for expansion.

What does that mean in terms of opportunity for the Group? The size of our opportunity within a country or sector is not easy to assess and can depend on several features, including population size, economic maturity and legislation. Based on revenue to GDP, if we take our U.K. and Ireland business as a base and use its market penetration, then bringing the rest of our existing markets to that level, it would mean Bunzl doubling its size. A somewhat more dramatic statistic is if you take our Danish business, which operates in only 4 out of our 6 sectors, then using population as a base measurement, Bunzl could be 5x the size. Bear in mind, these statistics are based on our existing footprint excluding China.

Today we have more than 1,300 potential targets identified in our deal management software. Our pipeline is active, and you'll have seen the good momentum we have delivered in recent years with our average annual committed spend double what it was in the years prior to the pandemic. The average deal size over the last 5 years has been around GBP 40 million, with a focus on bolt-on opportunities, supplemented by less frequent, larger deals. What we also find is that success breeds success. Each of our regions will have specific areas of expertise developed over time, and we will have often started with a platform deal and then increased scale through smaller bolt-on opportunities.

When we think about opportunities, each of our countries and sectors have specific areas of interest. If we take our North America safety business, for example, we have seen very good momentum developing this area over recent years and have established a strong presence in hand protection. So when we look at this market, whilst we see potential to further expand in gloves, there is also a significant opportunity outside of this in other PPE products. For example, workwear, footwear, respiratory. I could go on. And outside of PPE, but within the safety sector, there are further areas to explore, such as asset protection.

A great example of developing safety in the U.S. has been MCR. Bought in 2020, we quickly realized the strength of the management team and their capacity for taking on acquisition growth. So in 2021, we acquired a safety business called Tingley Boots, which was successfully bolted into MCR. Then more recently, we have acquired Gisa, a Mexican glove business, which greatly enhances MCR scale and reach in Mexico and across North America. And I'm sure there are more to come in the future.

Let's talk a little now about deal origination. This is where Bunzl's secret sauce starts to come into play. Acquisitions are truly in our DNA, and everyone who works in Bunzl is motivated to think about the next opportunity, the next deal. This entrepreneurial mindset is encouraged in all of our employees, from drivers and warehouse staff to our sales teams and senior management. We estimate that at least 75% of our deals come through internal contacts. Our local management take time to have a coffee every now and then with future prospects, telling them what life in Bunzl is like, and always reinforcing the message of a decentralized and entrepreneurial culture.

Deal origination is key, but so is execution discipline. This is where a central team experienced in transaction execution is absolutely key. And I am lucky enough to have a great Corporate Development team: 8 people each loosely aligned with the geographic area. This flexible alignment means they build great working relationships with our local management but are flexible enough to support in other areas as deal flow requires. The Corporate Development team is strongly supported by a central legal team who partner us on every deal and who utilize local legal expertise where necessary. Our methodology focuses on what we know is key to our success and on the specific risk areas for individual deals. We are constantly learning and adapting our approach and always negotiate robust transaction documents that we believe are best in class.

Lastly, onboarding and delivery. This is where the hard work starts. And the transaction team hands back to local management, who will have taken a backseat during the diligence process. Local management will have been kept updated and consulted throughout, but they are not in control or directly involved in deal negotiations. Onboarding requires respect, respect for the target's employees and customers, and reassuring both of them that it will be business as usual. We always start with a joint presentation to employees, finishing with a Q&A, explaining what being part of Bunzl really means and what the benefit of being part of a larger group might be.

What we work on first, and this will have been made clear to the sellers beforehand, is controls and reporting. Many of the businesses we acquire take weeks to prepare monthly accounts, if they prepare them at all. We show them how to do it in 7 days, and we often install a financial controller to help do this. Next, where relevant, comes realizing those purchasing synergies through the matching of prices and supply negotiations. Another quick win can be on freight, where we obviously have the benefit of scale compared to an acquired business. We also start looking at the working capital opportunities as owner-managers have often overinvested in stock and tied up their cash. Our disciplined approach filters out many opportunities that don't quite feel right. And often we back away respectfully if a target is not a good fit or the time is not right.

The early courtship phase may last anything from 6 months to 10 years. We play the long game. A great example of this is one of our deals completed earlier this year where we got close on 2 previous occasions, finally signing the deal some 9 years after our first meeting. An important filter for us is the approval of our Executive Committee. This happens at least twice during a process: once before an offer is made, and then before the deal is signed. In most cases, however, inevitable issues arise along the way, and that will require extra input or guidance from the Executive Committee. Over the last 5 years, ExCo have reviewed around 280 businesses, of which 70 resulted in signed deals. This speaks to the rigor of the review process.

In addition to ExCo, the Board also reviews and approves large deals. I also present to the Board each year on acquisitions. I present on the completed acquisitions 2 years previously, with an assessment of actual performance against the acquisition case, together with an analysis of our return on investment. Obviously, at a local level, the performance of any new acquisition is constantly measured from day 1.

I would now like to take a deeper dive into our selection process for deals. We use a 9-point template to evaluate a business. This template includes characteristics as basic as: is it a B2B goods not for resale business? And more detailed ones like how fragmented is the customer base? How strong are customer relationships? And what is the real value proposition. What does the competitive landscape look like? And is there the ability to consolidate further?

Two factors are especially important, though. The first is attractive financials. The business should be growing and operating with good profit margins, plus delivering a good return on capital employed. The other fundamental factor is less tangible, but possibly even more important, and that is a strong management team. We want a team that will stay with the business that is a good cultural fit. We will obviously support and develop them going forward, but we are never looking to put our own team into a new acquisition.

As we move through a process, the critical evaluation does not stop. And during diligence, there are many, many reasons a dealer may lose momentum or fail. Some issues can be insurmountable, making a deal impossible, while others can be addressable where a pause is required, so we can revisit at a later time. Issues can be down to financial due diligence findings, which create a valuation difference. Also, our view of the target's management capabilities can evolve and make us rethink our plan.

To put some numbers around our selection and filtering process, we analyzed our deal flow in Spain over the last 6 years. Our teams, both locally and centrally met with over 100 different companies, 45 of these signed NDAs. This enabled us to make a deeper review. Then ExCo approval was given for 22 offers, which finally resulted in 10 deals. As you can see, the attrition rate is quite high. And one of the reasons for our success is due to the number of deals we don't do. There is no pressure to complete a deal and nobody is incentivized on deal volumes. It's all about getting it right.

I will wrap up by talking a little about our valuations and how we consider returns. All our deals are compared to a project WACC. This is broadly equal to the country-specific cost of capital. We look at the return on invested capital, or ROIC, for a deal and we expect it to achieve the project WACC in year 2 or 3. Whilst this is the case, on average, our deal surpass project WACC in the first year. Deal multiples obviously get talked about quite a lot and at times get influenced by the level of M&A in the market. Also, larger deals generally attract more direct P/E attention and, therefore, carry a high multiple. I explained earlier our disciplined approach to execution. This discipline equally applies to valuation.

Let me back that statement up with some numbers. Over the last 10 years, we have completed 112 deals with nearly GBP 4 billion of committed spend. Ignoring the 4 largest deals during that period, our average acquisition multiple at 8x is almost exactly the same for the first 5 years as the second. Alternatively stated, this is a ROIC of 12% to 13% on acquisition. One thing that has changed over the last 10 years though, is the volume of deals where we invite management sellers to retain a minority share, typically for 3 to 5 years. This has a real benefit in making our offers more appealing when compared to deal structures used by private equity and incentivizes the medium to long-term performance.

That concludes the first part of today's event, and I hope I have managed to explain some of the reasons why we are so successful at M&A and how we have managed to build a market-leading approach to growing our businesses through disciplined acquisitions.

Now to the first of our 2 videos, which brings to life our consolidation strategy in the Spanish market.

[Presentation]

Welcome, everyone. My name is Oscar Gonzalez. We're here today in the newly opened distribution center in the City of Málaga, one of our three main distribution centers in Spain. We chose this location, which is a great example of how we have combined sustainable organic growth with strategic acquisitions to shape how Bunzl does business in the country, allowing us to be close to our clients and serve businesses locally.

With me today, I have Alberto Grau, who is the Managing Director of Bunzl Continental Europe, and Iker Yeregui part of the selling family of Irudek and now part of the management team of Bunzl locally.

Alberto, you've been with Bunzl for many years. Please, can you tell us your Bunzl journey and how acquisitions have been important for you?

I joined Bunzl in 2008, attracted by the centralized organization and the long-term mindset. But Oscar, Spain has been a standout, growing from a small business of EUR 8 million, our first acquisition in Spain back in 2007, up to EUR 460 million today across several sectors, driven by 20 acquisitions, but also by significant organic growth. Seven years ago, I moved to Amsterdam to lead Continental Europe. From my position, I've been continuously supporting the acquisition strategy across the area. During this period, we have acquired 28 businesses, by the way, 1/3 of which in Spain.

I've been really active in Spain as well. We've looked at about 10 deals together. The impressive thing that I think about Spain as a history of acquisitions is that we've been able to buy across very different market segments for Bunzl. We've done the strategy to keep growing Bunzl distribution in Spain geographically. So we bought small bolt-on businesses to keep adding to this service for our clients. We've done the strategy to get new capabilities like the digital services we have in Spain. And we've also done the conscious decision to acquire new products with specialized capabilities. In most cases, we bought from [ outside ] to sell their business to us.

Alberto, what do you think makes Spain such a fertile ground for M&A?

First, Spain's economy has been mainly driven by a small to mid-market family owned businesses. This fragmentation creates a great opportunity for consolidation, in particular in our core market sector. Second, our local management team has been very active, historically, has been very active building strong pipelines, developing trustful and long-term relationship with potential targets, which ultimately turn into successful acquisitions.

So one thing I'm sure investors are keen to know more about is how do we continue to find good targets consistently?

We rely on the market intelligence developed by our local teams. They are close to the market in constant contact with players and help us build a strong pipelines. When we approach the target, we assess the willingness to sell, but also we explore the quality of the management, positioning the market potential to grow and cultural fit. And we do this constantly over the years, sometimes decades. And we stay disciplined in saying no if some of these factors are not there. But sometimes, targets are coming from corporate development.

It's a good point. Sometimes advisers contact us directly, and that is what will be different. When they contact us in the Corporate Development team, usually, the business comes with a sell-side adviser that has advised the family to sell. If the sell-side adviser is doing their job correctly, it means it has identified us as a potential buyer. And that's where we start. But the process is absolutely the same. We're part of the same process, we tick the same boxes. In the end, we just know that this is a business that is more ready to sell than when we approach it directly. But it's most likely a business that we have identified already in what you just described.

So Iker, from your perspective as a seller, how did you experience the Bunzl process?

Everything happened more or less 7 to 8 years ago when a friend of my father and also part of the management team of Bunzl approached my father and talked about, with the strategy, the centralized strategy of Bunzl. It is true that some private equities, they came to us in the first point some years ago, but we always kept Bunzl in the loop. We joined the Bunzl family in 2023 due to the centralized strategy and also that they wanted us as a family to keep in the management.

And was it a good decision?

I think yes, Oscar. Being part of Bunzl, we took some information that it wouldn't be possible without Bunzl. For example, like digital transformation, like health and safety, those departments, we wouldn't be able to make it go well without the help of Bunzl.

Alberto, what may Irudek stand out for you?

Irudek is a clear example of a business that ticks all the points we look for: strong cultural fit, growth potential, well-positioned niche business and solid profitability and excellent management team. Now after almost 3 years from the acquisition, I would say that this assessment was spot on because, today, the business has delivered strong organic growth.

Alberto, what does the centralized strategy mean for you?

In Bunzl, local managers are the owners of their destiny in the sense that they develop and execute their own business strategy. Why? Because they are closer to the customer. They know their needs. They know how to react fast to market changes while benefiting from the global scale and the structure of Bunzl.

Oscar, what makes Bunzl so good at executing M&A transactions?

We have a fully dedicated corporate development team that speaks 6 languages across several nations, that partners with our local business managers. That way, we can have a professional solution also tailored with local knowledge. Then we have a team that has global reach doing deals across multiple countries that we're able to know where the trends of our industry are going. But at the same time, we partner locally so we can understand the local trends and why each geography has different ways of doing business.

And lastly, given the number of deals we've done with family-owned businesses, we really understand family-led businesses, organizations and how they make their decision. And one thing that we've discovered that is really important for family owners is, first and most importantly, to build trust; second, that we are a good home for their business; but also never to lose the idea that they want to protect their legacy going forward. If we combine these things together, I think it allows us to be constant in delivering good acquisitions throughout the years.

Alberto, where do you draw the line between what is the central responsibility and a local responsibility when it comes to acquisitions?

First, deal generation is mainly originated locally. Thanks to the relationship we have with potential targets in every market. Then the negotiation process is led centrally. And during the due diligence, we support the central team through our local finance teams. And then finally, the integration planning is developed and executed locally and a coordinated communication strategy is put in place to manage stakeholders' alignment.

Yes. So really the central and local teams working together to deliver this. We are also very disciplined in our valuation approach. We need to make sure we balance the company's track record with the company's future potential with Bunzl in order to be able to pay a fair price for the business.

So Iker, what is next for you?

So next step, Oscar, first, my father needs to get retired, so the idea is that after my father gets retired, my brother and me, we are going to get into the management, and the idea for the brand as Irudek is to make the brand well-known everywhere in the world and be the #1 for protection company in the world.

Alberto, what's next for Spain and beyond?

Spain is an example of how we can grow inorganically in many countries replicating the model. We continue to find family owned businesses that are good fit for us, and we have the strategy to keep consolidating the fragmented markets in which we operate. Looking forward, in a broader context, Continental Europe remains one of the biggest areas for acquisition growth. And Oscar, you know that we have a promising pipeline. Bunzl's success is built on relationships and people. Acquisitions are not different. We have a dedicated team, proven record, disciplined approach. But most importantly, it is in our DNA, not just mine, but across the 27,000 Bunzl employees, to constantly be in the lookout for great business to join our family.

Alberto, thank you very much for your words today. Iker, thank you for joining us. And thank you for joining us today in this insight into our M&A journey.

What a great video, and thank you to the team for taking the time to prepare it. Next, we're going to hear from entrepreneurs who have sold their businesses to Bunzl. But first, I would like to share with you the words of Andrew Nisbet who sold his business to us last year.

"Preserving our culture was always a top priority. Bunzl made it clear they shared our values, respected what we have built and trusted our team. Their culture felt closely aligned with ours, which gave us real reassurance that the legacy of the business would be carried forward in the right hands. Bunzl were open, respectful and clear about their intentions right from the start. They played everything with a very straight bat, which made it easy to trust that the business and our people would be well-looked after."

This is a great summary of what typically matters to our sellers. And our next video will provide more insight on this from 3 others.

[Presentation]

My name is Alastair McLaughlin, MD for Bunzl Ireland. Today, Bunzl Ireland comprises of 6 operating companies and we employ 502 staff across Ireland. I joined our family business Thomas Mc Loughlin Limited from college in 1983, initially to put a computer in. I was meant to go back to college, but that never happened. In 2000, Bunzl approached us. The deal took about 2 years. It was very important to us that whoever bought our business, is that they were absolutely going to look after our loyal staff and equally that they were going to look after our customers. Through the negotiations with Bunzl, it was interesting in terms certainly to understand the strategic ambition for the growth in Ireland. They had ambitious plans, and we could see us being a part of that.

I find the whole process very straightforward. We were a structured tight, profitable, well-run business. So reporting for us wasn't an issue. Bunzl acted exactly as we agreed in terms of how Bunzl has helped to develop our business, certainly been able to tap into the global scale on the purchasing side, access to training courses and people development. That has been really strong. Access to funds for capital expenditure and to tap into the experience of the acquisition team. That has been really tremendous and there's a lot of skill and talent in that team that has been very useful. We have a clear plan for the sectors and markets where we want to develop. And then in terms of discussions on attracting people, I mean Bunzl have here a very good reputation. We're a well-respected business, well-respected employer. It's about looking after customers and is making sure that we give first-class service.

Hello. My name is Minna Åman-Toivio. I'm a founder of the MedKit, Finland, which was found in 2008. And we merged with Pamark, 2021. Since that, I have been the CEO and the main owner with my family in Pamark. We sell daily consumables for the medical side, nursing side, HoReCa side, cleaning and hygiene. Finland is country #32 for Bunzl, which means that we were the first acquisition in Finland, meaning that we were the anchor acquisition, meaning platform for the growth. We have to trust the partner we choose. Bunzl is the best part for my future, for our business and, most important, for my staff members. We got the first contact from Bunzl M&A team, they came to visit Finland and Pamark and the conversation starts. It took about 3 years because we are business owners, we have to find the right future home for our business that we can continue as we have planned. But also on the other side, we didn't want to -- we want to take benefits out of Bunzl as well. So we needed a future for the growth.

Being 1.5 years now with Bunzl, it has been learning curve. All the quality processes, IT, everything has been improved. Our staff members have been very amazed. People have been very supportive to us. They are happy to come and visit Finland. We have had several audits coming from our customer sites, which shows us that our quality level in every segment has improved.

In Finland, we see a lot of opportunities for the future, maybe also in Sweden. But in Finland, we have internally found 32 acquisition targets ourselves. And together with the London team, we see that there's a lot of business opportunities for the growth. And what can Pamark and Finland brings Bunzl? It can bring some energy, northern lights, snow, guts and female energy, of course. And it can show that the future is very bright.

I'm Sam Monte. I've been working here at Monte almost my entire life. Towards the end of the year here, going to step into the General Manager role to lead our overall business here at Monte Package Company, taking over for my father who has been running our business, growing our business for the past 40 years or so.

Our business was started here in Riverside, Michigan in 1925 by my great-grandfather. Over the last 100 years, our company has grown and covered the entire eastern U.S. selling agricultural packaging, harvesting equipment, growing supplies to growers and packers all throughout the produce industry.

In 2018, our family decided to sell our business to Bunzl. We were very comfortable with the fact that there was a very family-oriented culture within the Bunzl team. Some of the people that we talked to through the acquisition process, a lot of those people were people that had sold their businesses to Bunzl. They were able to remain active either in their own business or moving into a different direction within the Bunzl ecosystem, was something that we thought was a great opportunity for us.

Since becoming part of Bunzl, we've really felt the support from the Bunzl leadership team to continue growing our team here at Monte. The ability to purchase globally has been a very big opportunity and advancement for us, and to expand our vendor base and our product lines. And then just obvious support was a couple of years ago when we got approval from the leadership team to build a brand-new corporate office in our same area here in Riverside, Michigan.

We've been able to collaborate with a lot of the different Bunzl entities, whether it's Bunzl Distribution, Bunzl Processor, or Cool Pak. Cool Pak and Monte have a lot of customer layover. We have a lot of very similar products that we sell. Looking ahead, we've got some pretty big expansion growth opportunities and objectives that we've set out for our team. We're going to continue to add value. And those things are very well supported by Bunzl.

My thanks to Alastair, Minna and Sam for taking the time to make those videos and sharing their heartfelt thoughts on what selling to Bunzl is really like.

That concludes the presentation stage of today's event. But before we move to Q&A, I'd like to introduce you to today's panel. We have Alberto, Oscar, who you will recognize from the first video. And joining them today is Nicolas. I'll let Nicolas introduce himself to you.

Thanks, Andrew. I'm Managing Director of Central and Eastern Europe. I've been at Bunzl for 14 years now, starting in the acquisitions team in Corporate Development, where I was involved in over 30 acquisitions. I then moved to South America, where I was responsible for the integration of a recent acquisition there. And more recently, I'm in Central and Eastern Europe, overseeing and supporting the region in which Bunzl has been present for over 20 years. And in that period, we've acquired more than 6 businesses, more recently in Poland a few years back.

Thank you, Nicolas. Before we open up to questions from the audience, I'd like to just get the team here warmed up a little bit. So I'll throw a few questions at you, if that's all right, guys.

Alberto, you've done 40 deals with us in your career at Bunzl. As a business area head, how do you keep that pipeline active and full?

Well, Andy, I think it's all about focus, consistency and discipline. We basically -- we know very well the markets in which we operate. We know our competitors, we know the relevant players. So from my position, I empower local teams to engage with potential targets to build these trustful relationships for the targets, think of Bunzl as a preferred option when they are ready to sell.

And how much of your time do you dedicate to M&A?

I would say that approximately 20% of my time is devoted to deal generation and supporting execution, reviewing IMs, discussing with Nicolas and my team the opportunities we have on the table, discussing with you and your team the strategic fit of some of these opportunities. And what is more important, visiting and meeting the targets. It is very important to meet them face-to-face to assess the quality of the management to assess the cultural fit. I think it is crucial to look into the seller size and ask yourself the question, can I work with these people for the next 10 -- 5, 10 years? If the answer is no, no matter if the business is very good, I think we walk away.

Thank you, Alberto. Oscar, you and I have worked together now for several years. I'm sure people would love to hear how we think about scaling our model, as Bunzl gets bigger, how do we keep that pipeline growing and maintain the impact that the acquisitions have had on the Group over recent years?

Well, as you said before, acquisitions have had a significant impact on the Group growth. Around 2/3 of the growth comes from acquisitions. And I often say, as we get bigger, so our ground gets bigger. The more we grow, the more ground we have to cover. And I think this is really easy to explain in 2 ways as examples. The more like-minded ex-owners, good managers that join Bunzl, the more opportunities they bring to the table. Very recently, we did an acquisition in Mexico, for example, and the ex-owner, now the managing director of that business, 3 or 4 days after acquisitions, he was already calling me, say, "These are 5 targets that we should look into, and more likely some of them will be a very good fit for us." So the more people we bring into the Bunzl family, the more opportunities or the more eyes we'll have to look for opportunities.

Our second way that we do it as well is when we do a larger acquisition, sometimes -- that sometimes we call a platform deal, that can result in opening new opportunities in new markets or in new sectors that we were not in before. Great example of this is when we did an acquisition in the med tech space in 2021 in New Zealand. This -- since we acquired that company, we've done 3 or 4 acquisitions in that region, in that same space. And now we're looking to expand that same space into a place like Australia, which is relatively close by.

Another great example of this is the MCR example that you gave where we bought MCR. And then we've done very good bolt-ons into MCR that are complemented by the capabilities that MCR brought to Bunzl. And by that, what I'm trying to say is that the market is very fertile. The market is still very fragmented. And while the market sometimes might be cyclical, in the long term, we will continue to find very good opportunities that will fit well for us.

And what's your reflections on our activity in 2025? And how do you feel things shaping up as we move into the last quarter of the year and through into '26?

Well, '25 might seem that it was not a very active year compared to the previous years in terms of M&A transactions. And that is probably related to how the more global macroeconomic M&A market has been. But looking into '26, I think it's very exciting and very promising. Certainly, we are looking at very interesting prospects. We've seen that sellers are beginning to get ready to transact. And we are ready when they are ready. So I'm seeing '26 with very -- with a lot of excitement and a lot of opportunities to come.

Good. Thank you. Nicolas, you started off working with me in your early years in Bunzl 14 years ago. We were both in the Corporate Development department, and you've seen deals from the center and you've seen deals from the region. How would you describe the relationship? And how does that relationship between central and local teams work? And how important really is that to our model?

That's right, Andrew. I've had the privilege of working in the London team and seen the execution and then also being with my local team originating. I think the origination is really where the local teams excel, where we're constantly bringing deals up to you and your team in the head office. When it comes to the execution, myself and my local teams will take a step back whilst you're negotiating the contracts and getting very strong contracts in place for Bunzl. Then back into the integration phase, once the contracts have been negotiated, it's back to us, we've got the ball. And we're bringing in the businesses so that they can thrive within our environment.

Throughout all that, I have Andrea, who is a member of your team, who's very -- Romanian, by the way, so very focused and with a good knowledge of Central and Eastern Europe. She's constantly being brought deals from her brokers, contacts and Bunzl's broker contracts. As soon as she gets that, she's sharing it with me, and we're deciding together whether this particular acquisition would take a good step in the right direction for my region and Bunzl as a whole. It's a constant conversation.

And do you feel any pressure from my team to actually do deals?

No, none whatsoever. The pressure is -- and my responsibility is to grow my region and my P&L the most I can. And I'll be doing that mostly through organic growth. What do our customers need to grow and to thrive themselves? If an acquisition supports the customer and the customer proposition, we will absolutely pursue it.

Okay. Thank you, Nicolas. All right. I'll ask you now to forward to us and ask your questions. [Operator Instructions]

We'll now go to the first question from David Brockton.

Hello. I'm hoping you can hear me. Can you hear me?

We can hear you, but we can't see you.

Wonderful. Okay. Well, apologies. That's my...

We can't hear you anymore, David. Perhaps we could leave David and move to another question?

We'll now go to Annelies.

Hi there. Can you hear me?

Yes, we can hear you.

Great. Perfect. I have 2 questions, please. Sorry, Annelies Vermeulen from Morgan Stanley. So firstly, just coming back to some of the stats you gave, I think, for Spain, where over the last 6 years you'd made 22 offers, but only 10 of those have resulted in signings. I don't know if that was indicative for the rest of the business. But could you talk perhaps a little bit about the ones that weren't converted? So was it that you then ultimately decided to withdraw? Or was it the seller? Why? Do they want more money? Was there a competing offer? Just talk a little bit about the ones that weren't converted?

And then my second question was just on Nisbets. So any integration lessons you've learned from your largest acquisition to date? I appreciate it hasn't been entirely smooth sailing. So is there any -- has it changed the way how you think about large versus small deals and how you will allocate capital between those going forward?

All right. Well, there's a lot in there to unpack, but thank you very much for the question. I'll cover off and put a bit of detail around the Spanish stats, and then perhaps, Oscar, you could talk about the deals that might not have been converted. But the -- I think we've not done the work, but I think the Spanish stats are fairly indicative of our overall. And I do have a feel of probably about 50% of the 10 deals out of 22, probably about 50% is about the right percentage of deals that go through to conclusion.

But bear in mind, some of those, we will revisit later. Deals can get stuck in the mud for whatever reason, and they will come up again later. So you've got to bear that in mind as well. But Oscar, would you like to share some of the ones that might not have completed? And then I'll come back to your Nisbets question.

Yes, absolutely. For example, there are situations that we go through a thorough DD process after we do the offer. And we continue to learn from the business and from the management team of the business throughout this DD process. Sometimes issues come up. And we are really sitting there understanding how these issues are addressed by the management team, by the seller's team. And that just helps us to continue to understand the business and how the managers manage their business better.

Sometimes this results in us making a decision that is probably -- that business is no longer the best fit. Inevitably, there's also the situation that we like the business, but it's not the right moment for that business for us to buy it. Inevitably, it's a cycle and some businesses are growing and others are not. So we tend to try to find the right business at the right time from the right people. We have to continue to be disciplined. And that's how we are able to deliver that and the 10 that we actually do perform to the highest standard.

Thank you, Oscar. I think also at a local level, I think cultural fit is very important. So if we're thinking of an acquisition to come in and one that we want to nurture for growth, cultural fit is very important. And that ability for the management team to come in with that Bunzl spirit, I think, is very important.

Yes. Thanks, Nicolas. And just going back to your Nisbets question. The first thing I would say is deals like Nisbets don't come around that often. We've been talking on and off with Nisbets and looking at them for 20 years. They've been -- they were a big competitor to us. They are the market leader in the U.K. in catering equipment and possibly one of the biggest B2B distributors of catering in Europe. They've got terrific own brands developed over many years. They are a strong player in the sector.

And what we found is that product expertise and -- that's really helped us. And that's -- we've delivered synergies already that's ahead of our initial expectations. The current performance is a little behind where we want it to be, but we're fully confident that we're going to claw that back, and we're going to achieve the original project WACC by year 3 or 4. So we're fully behind the acquisition, the way it's going.

We'll now go back to David Brockton.

I'm lucky, hopefully. I will keep my camera off, if that's okay, just to avoid it crashing. Two questions, please. Firstly, are you able to provide an estimate of the typical cost synergies that you derive from acquisitions or the cross-sell benefits that subsequently occur? And then secondly, do you see a discernible difference in transaction multiples between sectors, so, i.e., between cleaning and hygiene and safety and also food service?

I'll cover off the multiple points and then hand over maybe to Nicolas and Alberto about the synergies. They're more able to talk to what really gets delivered. On multiples, I think multiples, as I mentioned in the presentation, multiples go through cycles. They're very much dependent upon activity. And I think in most of our sectors, the multiples are relatively constant. I think the thing that really drives it is size and opportunity, the opportunity for it to grow in a market and the -- just the quality of the business really as much as anything. So I don't perceive too much of a difference in multiples.

But the real big difference comes where you've got platform or large deals like Nisbets compared to those bolt-on opportunities. And we really play in the area where you've got those small and medium-sized opportunities, those family businesses where you can achieve multiples of 6 to 8x.

Well, in terms of the synergies, we basically have 3 main synergies. One is purchasing synergies, which normally are immediate, because we can realize that in the very short term. Then we have the revenue synergies that comes down to the cross-selling opportunities, selling more to the existing customers. This normally takes a little bit more time.

And then we have the cost synergies, which makes sense when we fully integrate a small bolt-on acquisition. In the case of purchasing synergies, I think they are higher if we acquire a business in the sector and in the country we are in, right? And it's case by case and varies a lot from one case to the other. We need to take into account as well what -- that part of the synergies also help us to basically finance some resources or some support that we could potentially need to really land or onboard these acquisitions into the Bunzl family.

Perhaps to Nicolas, you could give a little bit more color.

Thanks, Alberto. I mean, David, from day 1 conversation, and even probably before that, a conversation with the selling MD is on how we can potentialize them. Alberto mentioned cost synergies, that's always the most obvious one and the quickest one. We have global suppliers who are often -- because we're acquiring in similar segments, we have global suppliers who are also supplying the new acquisitions. So that's where we're seeing the immediate benefit. And then over time, obviously, we are looking also at the cross-selling. That takes time partly because it takes time to get the product into the new customers, et cetera, and build out the customers in the other countries or in the other segments. But that is a monthly conversation with the local management.

It is important to mention as well, we have a kind of process, solid process to realize synergies, we call it POP, purchasing optimization project, which basically put in place a task force to realize synergies with suppliers to basically combine to look at for the lowest price of those companies.

We're very well-rehearsed for that process.

Exactly. And we can incentivize that team to make this happen as well.

We're now going to a question from Rory McKenzie.

It's Rory McKenzie, I'm the analyst at UBS, where, coincidentally, I've also been following Bunzl for 14 years, but on the outside. Just a follow-up on those synergies. How do you build in those synergies to your valuation framework that you're willing to pay, maybe especially in the context of now using more deferred and contingent consideration for your joining companies? And also, I guess, we deal in a very sanitized world of adjusted EBITA numbers, which isn't always the kind of metric maybe companies look at internally. So can you talk about how you match that process with them?

And then just secondly, maybe going against synergies, do you ever find that any of the companies that you're looking at are maybe really great in the areas that you like, but maybe they've got some adjacent areas that don't quite fit with your 5-point template as the way you want to be? And how would you manage that kind of portfolio issues in those acquired companies?

Okay. On the first point, I would like to ask Oscar to respond a little bit on that. But beforehand, just I'd like to say we are very cautious in our measurement of pre-acquisition synergies. We have our template, we have experience, but we're very cautious about how we factor those into any form of valuation. But perhaps you'd like to tell us a little bit more, Oscar.

Sure. Of course, we're very disciplined in our valuation approach. We try to avoid the trap of just falling into an Excel by putting a number of synergies that then they need to get realized. And our experience and with the many deals we've done is that it's difficult to actually realize all the synergies that you put into an Excel model. So we're disciplined from that approach. And we also never forget that we also bring investment into the business. We buy businesses in order to keep them and hold them long term. So from the very early beginnings, we need to bring some investment into that business. Of course, that cost is more than offset with the growth and the synergy we bring in, but it's also something to keep into account.

When you're talking about our minorities and that we have partnerships, in those partnerships, I think we are happy to pay for the synergies that the seller or the shareholder has delivered and is bringing to the table. We're happy to share those because we've kept most of those synergies by owning the majority of that business. So if they are realized and they have been brought to the table by them, we can share some of the upside.

Thank you, Oscar. And I'll address a little bit your question on where an acquisition may come with adjacencies that we don't necessarily think will fit, and maybe, Alberto or Nicolas, you can think of some examples where we've experienced that. But we -- that does happen. And I think it is a case-by-case basis for us to assess what the risk is around those areas that might not be a perfect fit for us. And it's difficult to really speculate, but it is a case-by-case basis. And you find that acquisition opportunities, they specialize in what they do, and they're very good at what they do, and we buy good businesses. I can give you one really good example of where an adjacency has worked.

The acquisition of Greenham where I joined through Bunzl, Bunzl bought Greenham because it was the biggest cleaning and hygiene competitor in the U.K. market. Safety was an adjacency. That's a great example of where an adjacency really can actually bring value to the business if it's treated in the right way. But I don't know if you've got any more recent examples.

Yes. I think probably one example of an adjacency for that business, but not adjacency for Bunzl, was Tecnopacking perhaps. Tecnopacking was an industrial packaging business where the food service packaging was a minor part of the deal, and today it represents more than 50%. So we have been growing that, thanks to the knowledge we have in the foodservice packaging sector in Spain.

I think it's not as black and white as it is whether it's an adjacency, therefore, we've got to take it out. I think we're always learning from new acquisitions and businesses are bringing in new ideas on how to enhance the touch points they're having with their customers. So it's -- if a business is maybe not exactly what we do, but maybe it variates, we'll learn from that and adjust it so that it matches, let's say, our working capital requirements or our service requirements.

Yes. We could call adjacency as well to this converting or to this light manufacturing, we denominate this type of things. For example, a business that has 10% of the business, a couple of machines where they basically customize packaging rolls, right? So this type of business, this is an adjacency that creates a lot of value over time. So we are happy with this type of adjacencies.

Yes. But just to finish that off, just to reassure you, we don't stray too far from the core. That is where our strength is.

[Operator Instructions] We have had a couple submitted in advance by e-mail. So just to pick up the first of those to go back to culture, how long do management teams typically stay with the business? And how do you ensure they become part of the Bunzl DNA in such a decentralized group?

Okay. I will defer to Nic and Alberto on that. But beforehand, I'll quote one statistic to you that came across my desk just recently. Over the last 5 years, we've completed a very large number of deals. And the number of sellers within those deals that still are with us today is 80, 80 sellers are still with us. Now some of those transactions might have had 2 or 3 sellers and some 1. But that's quite a compelling statistic as to how people stick with us and stay with us. But over to Alberto.

No, the time that sellers normally stay in the business varies from 3 years, which is basically what we normally ask them as a retention, up to 25 years, as we have seen in the video of Alastair. We have, in Europe, we have some examples of Joss in the Netherlands, has been 17 years, or Hans has been 11 years, or Juan Pedro sold his business back in 2010 and officially retired last year despite of the fact that he is still advising us and engaged with us. So that's a broad range of basically time where they spend with us. But in terms of how we can -- we would like to talk about onboarding rather than integration. So the way we onboard people, we onboard new employees is through strong communication from day one. Perhaps you, Nicolas, can describe some examples of how we do that.

Yes. That's right. I mean from day 1 myself and my team are going into the newly acquired business to explain what it is to be a Bunzl, who we are. But I think something that we shouldn't forget is that we are, to the core, a highly decentralized business. And where we are good as managers is keeping true to that and recognizing that the businesses that we're acquiring are highly entrepreneurial. So we're bringing these guys in, communicating, of course, the key points that what makes us being Bunzl, but also being very, very respectful and trying to make sure that they grow and continue to grow in a way that they have done so in the past.

One important point is we offer them, we offer the employees kind of suite of talent development programs from local trainings to the senior leadership program, which is a global program for senior executives. And they have the opportunity to grow within Bunzl. We have many examples. And one example is Frank. So he came with the business and now he's CEO. So the possibilities are infinite for employees joining Bunzl.

And as we saw in the video earlier, we're bringing in our EHS standards. We have digital -- very good digital know-how. Alberto's team is top of the market in terms of IT knowledge, et cetera. And [Technical Difficulty] in day 1.

Now going to go to a question from [indiscernible].

Yes. Good afternoon, gentlemen. Thank you for the insight. I have a question regarding the -- your IT system and when you make all these acquisitions. How do you onboard the different companies? How easy is it to onboard? And usually, how long does it take, not only the warehouse management system, but also the ERP, the CRM, et cetera, please?

Yes. Good question, [indiscernible]. And it's a question that I get asked a lot, I'll hand it over shortly to Alberto. But it's a question I get asked a lot by sellers. Their ERPs and their IT systems are often quite dear to them. And the thought of changing ERP can fill a seller with dread. But I'll let Alberto explain.

Yes. Just in Continental Europe, we have almost 40 different ERPs. So it gives you a flavor of the complexity in terms of ERP, which, by the way, are not so relevant. So we have created an architecture so we can collect data, we can upload the relevant data we need basically from the business in a very easy way, right? So I think the systems are not constrained, are not a limitation, and we can easily onboard this business with the relevant data we need from them.

The one thing that we actually do look at during due diligence is around cybersecurity. We do our own cybersecurity assessment during the due diligence process. And we make sure that the businesses that we buy are cybersecurity protected from day 1 after acquisition. So that is one piece of the learnings during the process that we hand over to the operating management team.

Yes, good point, Oscar. And just to elaborate a little bit on what Alberto said, it's not the ERP that's really important to bring benefit to a business. We're trying to enhance the business by putting in things like warehouse management systems, et cetera. And these can sit around a different ERP. So we can have more ERPs, but we will try and focus and deliver benefit through things like warehouse management or CRM systems.

And that doesn't mean, Andrew, that we -- from day 1, we're reporting. So we have a reporting tool HFM which means that week 1, we're already reporting sales through the internal system. And by the end of the month, absolutely to normal to Bunzl standards, we're reporting a full P&L and balance sheet.

So it's a bit of a complex answer to your question, Bastian, but hopefully, you have a clearer picture now.

Well, I hope your system is not as complex.

[Operator Instructions] Otherwise, we've had another question that's been submitted via e-mail. So I'll just ask that question to the team. The question is on the theme of integration and the type of investments you make in the business when it comes into the Group.

Okay. Who would like to have a bit of input to that?

Well, we basically -- as I mentioned before, we onboard. We don't really integrate new businesses. And there are 3 elements that we basically, we could say, impose. One is financial reporting. The second is cybersecurity. As Oscar mentioned, the third is health and safety, right? So we basically invest or help the seller to invest in these key areas for us.

And generally, we're a low capital expenditure business, aren't we?

We are a low capital expenditure business.

Occasionally, we may need to invest in a bit of racking or whatever, but generally...

Yes. Well, I mean, health and safety, we normally have higher standards in Bunzl than the local legislation. So this is an area where -- we factor that area in the due diligence before because we assess that, but this is an area where we put some investments and, if necessary, also in IT, cybersecurity -- specifically in the cybersecurity side.

Yes. In the end, it's case-by-case basis. As we do due diligence, we learn more about the business. And sometimes we learn that they need some extra support in the finance team or some extra support in the reporting side. So throughout the due diligence process, we already factor in that we need to give some extra support there.

Yes, I'd say that's the most common investment, is always in the financial controller or a financial director, to ensure that we're getting the reports in and the standards that Alberto is talking about. It's a Bunzl bridge for us.

We'll now go to a question from Catriona Hoare.

Thanks for the presentation. I'm from Navera. We are shareholders. And I was wondering if all the approaches you have discussed today, can we assume that those apply across the entire global footprint of Bunzl? I guess I'm particularly thinking about the U.S. business, your largest business, and how you manage, I suppose, the challenges around time difference from having your team in the U.K. versus the U.S. and whether the members of your team that are responsible for the U.S. have been with Bunzl for the sort of length of time that the team is presenting to us today or whether you've seen more turnover there, please?

Yes. I'll cover that off. I think the strength of the team in the U.S. is great. I have 2 members of my team who are dedicated to North America. We have a CEO in North America who plays a very active role in M&A as well. Jim McCall has been with us a long time, he was previously the CFO. And he really enjoys getting involved in M&A both with sourcing opportunities and at times likes to have his input in terms of the transaction process as well. Plus we have a current CFO out there, Katie, who previously was in an MD role in Central and Eastern Europe and has a long history. I think Katie has probably been with us, I don't know, 10, 20 years. So we've got great experience in the team there.

From my team, it's guy called Will who heads up the approach in North America. He's been with Bunzl for, I think, around 12 years and the approach is very similar to the rest of the world. We look to work very closely with the management teams in North America. Will is -- he's actually over there at the moment. The time difference is no real barrier. I mean the time difference in the U.S. is probably easier than us working with our colleagues in Australia. We have to do that. And as I say, Will's got some great relationships locally.

And we have a guy in North America who's been there for a long time. He's a real deal maker for us, a guy called [ Joe Wyle ]. He has his little black book. He has all the contacts. He has all the relationships with potential sellers. And that consistency over time, and he's given that consistent message of what sellers feel like after joining Bunzl because he was once a seller. So we are very active. We have a consistent approach, both in North America and Continental Europe.

Sorry, I was going to add because you mentioned the time difference on that. We are indeed a London-based team from the corporate development side, but we also do spend a lot of time traveling, visiting the businesses locally and partnering with the local MDs. In my personal situation, smaller country, North America, but I do go a lot to Mexico, spend a lot of time in Mexico with the leadership team from Bunzl there, trying to develop and get to know the market better. In the same way, I'm in Spain, most of the year, I mean I'm in South America as well. So every member of our team spends a lot of time in ground in this specific region, knowing and learning the opportunities in there.

Next question will be from Sanjay Vidyarthi.

Panmure Liberum. Just a question on strategic oversight as opposed to financial oversight. Given the decentralized model, how can you spot a misstep, say, on product innovation or something like that before it comes through in the numbers? What are the controls and the processes in place to spot that?

I think the -- I'll start with how we review acquisition performance at the center, and then I'll let the team talk about how that works locally as well. And we have a very robust approval process for all of our acquisitions. And you'll have heard in my presentation about the role of the Executive Committee. And the Executive Committee in Bunzl consists of Frank, the CEO; Richard, CFO; myself; the HR Director; and the GC. And we will sit down every 2 weeks and look at potential acquisitions, looking at them from an operational and quality perspective and looking at them through the strategic lens of where we feel we need to invest.

And we have great oversight centrally in what we're doing from an M&A perspective. But locally, we have wonderful experts like Mitch, who's the leader in MCR, and Beth, who runs our safety businesses in North America. They have great oversight with their local markets and bring forward to us great businesses. Now in terms of misstep, we present back to the Board every 2 years. The control on me is going back to the Board every 2 -- every year, on the acquisitions that I completed 2 years ago, and present those back to the Board, explaining the performance of those businesses. So that's the backstop. But obviously, we're looking at businesses day in and day out once that deal has been completed.

Sorry, it was more the daily -- it was more the day-to-day side of things that I was asking about, in terms of if the business is actually kind of going down the direction once you've acquired it that may ultimately not be the right one.

Well, we basically monitor very closely the financial KPIs, the P&L and return on capital on, in my case, on a monthly basis with Nicolas and my team. And we do a quarterly review with Frank and Richard. And we have 2 touch points in the budget process, strat plan process. So we basically -- and Nicolas is doing this on a daily basis. So we can spot early on whether the business is underperforming according to the acquisition case or not, and we can put in place an action plan to basically put them on track. Basically we have rather a robust system to monitor the business on a daily basis. And probably you can add...

It's my responsibility as regional MD, as well as my colleague -- my peer regional MDs, to have that relationship with the business on a daily level. I will be personally having 4 more weekly meetings with each of them. The MDs in each of those businesses will be talking to me regularly, probably daily, if not several times a week. So it's my responsibility to create, as a manager, to create that reporting line with them.

Don't forget our scale. I mean we -- there's 4 of us here today, but there's 100 business managers out there throughout the world who are very close by, who keep a monitor on new acquisitions, who are there to provide support. And we do have that scale that we can manage these acquisitions very, very quickly if things start to drift slightly.

And obviously, these are conversations based on tools. So we have KPIs, we've got data from weekly sales to monthly operating KPIs. These are things that will drive a conversation. You'll spot it very quickly if things are going awry.

Yes. And most of what we acquired, the teams have been in place for a long time. These are mature managers. Often the family sellers who have been in the business for many, many years. These are acquisitions, they're not going to go off the tracks. They're doing what they're doing. And that's why we're buying them because they're good, quality businesses.

I think one great thing about that, we execute in-house the deals as well, is that the person that actually did the deal, obviously, we give it over and the responsibility passes to the business area, but the person that manages the deal and the diligence is still within Bunzl, is still a partner of everyone here. So if there's anything that we need to pay closer attention to, we're there. We're constantly speaking to entrepreneurs. So it's just a continuity post deal that is available for us given that we execute the deals in-house.

Hopefully, that answers your question, Sanjay.

Yes, it does.

Thank you. That concludes our Q&A session. I will hand back to Andrew for closing comments.

Okay. Well, really, just remains for me to say thank you all for attending. I hope you've enjoyed today's session and it's given you a sense of the opportunity and the capabilities of Bunzl. We have a great acquisition pipeline and a great acquisition machine. We've got a well-established, disciplined process, and we fully expect to continue to play a fundamental part in the growth of Bunzl going forward. Thank you for listening.