Bunzl H1 2025 Earnings Report

Bunzl EPS Results

• Actual EPS: GBX 77.80
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Bunzl Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Bunzl Announcement Details

• Quarter: H1 2025
• Date: 8/26/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, August 26, 2025
• Conference Call Time: 4:30AM ET

Bunzl (LON:BNZL) operates as a distribution and services company in the North America, Continental Europe, the United Kingdom, Ireland, and internationally. The company offers food packaging, films, labels, cleaning and hygiene supplies, and personal protection equipment to grocery stores, supermarkets, and convenience stores. It also provides food packaging, disposable tableware, guest amenities, catering equipment, agricultural supplies, cleaning and hygiene products, and safety items to hotels, restaurants, contract caterers, food processors, commercial growers, and the leisure sector; and gloves, boots, hard hats, ear and eye protection, and other workwear, as well as cleaning and hygiene supplies, and asset protection products to industrial and construction, and ecommerce sectors. In addition, the company offers chemicals and hygiene paper to cleaning and facilities management companies, and industrial and public sector customers; gloves, masks, swabs, gowns, bandages, and other healthcare related equipment; and healthcare devices to hospitals, care homes, and other facilities serving the healthcare sector. Further, it provides packaging and other store supplies to retail chains, boutiques, department stores, home improvement chains, office supply companies, and related e-commerce sales channels. Bunzl plc was founded in 1854 and is headquartered in London, the United Kingdom.

Bunzl H1 2025 Earnings Call Transcript

Key Takeaways

• Negative Sentiment: Revenue grew 4.2% at constant exchange rates but underlying sales were flat, while adjusted operating profit fell 7.6% at CER and the margin narrowed by ~100 bps to 7% due to headwinds in North America and Continental Europe.
• Positive Sentiment: Cash conversion reached 97% and net debt to EBITDA improved to 1.9×, enabling a 0.5p interim dividend rise and resumption of the £200 m share buyback (with £86 m remaining).
• Positive Sentiment: North America distribution has new leadership, restored local pricing authority, cost reductions and inventory normalization, yielding early service level improvements and a forecast of moderated H2 margin decline.
• Neutral Sentiment: Continental Europe’s margin fell ~100 bps amid French price deflation and weaker online traffic, but ongoing cost actions and easier H2 comparatives should reduce further margin erosion.
• Positive Sentiment: Bunzl’s 6% compound annual profit growth since 2019 underpins confidence in its resilient model, and the pipeline of 1,300+ acquisition targets—plus recent moves into Chilean healthcare and Mexico—supports long-term expansion.

Presentation

[Operator]

Hello, everyone, and thank you for joining the Bunzl Results for Half Year Ended thirty June twenty twenty five. My name is Sami, and I'll be coordinating your call today. I will now hand over to your host, Frank Ramzanten, CEO, to begin. Please go ahead, Frank.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

Good morning, and thank you for joining Bunzl's twenty twenty five Half Year Results Presentation. After a short introduction, I will focus on updating you on our North America and Continental European businesses. After this, Richard House, our CFO, will walk through our financial performance, leverage and outlook. We will then move to Q and A. But first, I want to thank all of my Bunzl colleagues for their hard work and dedication in what has been a challenging operating environment for many.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

I know many of you are working tirelessly to support customers and to deliver an improved performance in the second half of the year. I will start by summarizing performance over the first half. Bunzl delivered revenue growth of 4.2% at constant exchange rates. Growth was driven by acquisitions with underlying revenue broadly stable. However, group adjusted operating profit declined by 7.6% at constant exchange rates, with our operating margin reducing by around 100 basis points to 7%.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

This has been driven by certain larger businesses within North America and Continental Europe, with both business areas seeing a similar level of margin decline as the group overall. I will spend much more time discussing these shortly. Our cash conversion was better than we expected at 97%, although free cash flow declined by 22% due to our operating profit decline. We ended the period with an adjusted net debt to EBITDA of 1.9 times, slightly better than guidance, driven by good cash conversion. Richard will discuss leverage in more detail later, but we are now broadly in line with our target leverage range.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

Our capital allocation priorities remain unchanged. And within this, we remain committed to sustainable annual dividend growth. We are, therefore, announcing a 0.5 increase in the interim dividend today. August year to date, we have announced five acquisitions with a committed spend of approximately 120,000,000. As is typically the case when there is macro uncertainty, the number of signed deals has been lower than usual, but our pipeline remains active.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

In the first few months of the year, we also executed GBP 114,000,000 of an announced GBP 200,000,000 share buyback. We had paused further purchasing at the time of our Q1 announcement, aligned to capital allocation priorities and our short term leverage target. Today, given our current expectations for committed acquisition spend, we are resuming this buyback. 86,000,000 remains and will be fully completed by the end of the year. Before I go into the detailed performance, I want to highlight the main points I would like to take away today.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

Firstly, fixing the issues we see is our priority, and I am confident in the actions we are taking. While it is still early days, these actions are performing in line with our expectations. In particular and importantly, our North America distribution business is reenergized. I remain confident in our outlook and our expectations for an improved second half performance with a moderation of operating margin decline year on year compared to the decline in the first half. While it's only the first month and with the external operating environment remaining challenging, trading in July is demonstrating the anticipated improvement we are looking for in the second half.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

Secondly, I want to emphasize that we are committed to building further on Bunzl's historic success. Our performance in historic periods means that despite our earnings weakness in 2025, we have still delivered 6% compound annual profit growth since 2019. The Bunzl business model is fundamentally strong, and we continue to have an attractive long term compounding growth opportunity. I am confident in Bunzl's underlying resilience and consistency. And after fixing the issues, I intend for Bunzl to be associated once again with these key characteristics.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

So let me go straight to discussing the actions we are taking. Starting with the North America business. I will dive into the specific of recent performance shortly, but I would first like to spend a few moments giving some additional context to help you understand the evolution of this business. Our North America business area comprises around 35 operating companies, of which our distribution business is the largest. It generates around half of North America's revenue and around 30% of group revenue.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

It is largely it largely services grocery end customers and food service redistributors and is a leading national distributor in both these markets. Whilst we have experienced challenges in this business recently, it is important to remember that given its size, it has historically been an important contributor to the strong characteristics you typically associate with the group. Its resilience, for example, is supported by its exposure to both foodservice and grocery, which have complementary end market drivers. Furthermore, it has generating generated an attractive return on average operating capital, driven by strong asset turn in line with the business area overall. Distribution's strong customer proposition is supported by its scale and category expertise.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

We take these core strengths and apply them to our two main customer segments slightly differently. In grocery, given historical consolidation in this sector, our revenue is mostly attributable to national and larger regional customers. Grocery customers are using our products directly in their businesses to operate their stores and merchandise their products, and they prefer to allocate their own working capital and network capacity to goods they can sell on. They typically buy consumables from us over a contractor period, and we are often their sole distributor for all goods not for resale. Whilst all our customers care about price and product quality, this customer set really values reliability and consistency of service.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

It is slightly different for food service redistributors because the product we sell to them are items they will sell on to their customers. They are typically focused around 90% on food and 10% on non food items, and so they leverage the scale and depth of ranges that distributors and importers such as Bunzl provide on that non food side. These customers will often utilize more than one distributor in order to find the best availability and price. Speed of service is essential. Revenue in this part of the distribution business is more of a mix between local and larger customers.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

Overall distribution distribution generates around one third of its revenue to local customers with revenue weighted towards food service. The other two thirds is generated via larger customers with revenue weighted to grocery. Whilst distribution has continued to hold a strong market position for many years, as with any business, we need to keep evolving. So let me now take you to strategic and structural changes we have been implementing in this business over the last five years. In 2019, we were operating a brand spaced model, which meant that 40 general managers across the business were each managing the entirety of their own operations locally, from sales right to all of the supporting processes.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

National account managers coordinated our service delivery to national customers via these general managers. We delivered a very strong proposition to customers, but customer needs were changing. Our grocery customers in particular have become larger. Servicing them from our highly decentralized footprint impacted consistency and local management inward focus on operations, rather than being able to dedicate their attention outwards on sales and business development, also impacted our ability to drive new business. Over the years leading to 2019, we're seeing revenue momentum slow.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

There were some other factors at play. For example, the low level of coordination of our overall product range had resulted in minimal development of own brands. In 2019, we generated only 5% of revenue to our own brands. We're also being impacted by our exposure to cost plus percentage contracts with operating cost inflation and product deflation having reduced distributions operating margin. So strategic actions were sketched out for the business.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

Even though the DNA of Bunzl is to decentralize and empower local teams, we recognize we would need to flex our approach if we wanted to strengthen our leadership position and enhance our service and offering to customers. This would require us to move to a sales and operations model, which would separate operational activities such as ordering from suppliers, managing the warehouse infrastructure and logistics, from sales processes, allowing local teams to focus their effort focus their efforts on business development. Given the different nature of our core customers, the new organization will need to strike the optimal balance between centralization and local agility. Furthermore, we saw a strong opportunity to increase own brand penetration to complement our branded product range. We have long established relationship with branded domestic suppliers, and the right balance can be achieved with the correct development plan.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

We also needed to transition large customers from cost plus percentage margin contracts to index fee per unit contracts. This would reduce the downside risk to our margins in case of product deflation. New leadership was appointed to drive the operating model change and own brand development in particular. This strategy was and continues to be the right one for the business to live deliver a stronger platform for growth and improve margins. However, the challenges have been in the execution, as we will talk about shortly.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

Initially, we were seeing some positive progress. By the 2024, a lot of these actions were underway and working successfully. We had increased our own brand penetration to 14% with good demand supported by the product's price point and quality. We had successfully reduced our exposure to cost plus margin contracts with the revenue exposure across the Bunzl Group being around mid single digit percentage today. Furthermore, whilst we have seen some gains and losses, we are starting to see good momentum with grocery wins.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

Over the period 2020 to 2024, we delivered strong compound annual growth in profit. This was supported by our management of high levels of product cost inflation as well as our strong capabilities managing significant supply chain disruptions as well as the growth in our own brand portfolio. However, whilst we had moved to 14 regional hubs and implemented the sales and operations model in 2023, our execution of the strategy fell short in some key areas. Centralizing decision making and processes improved consistency for large accounts, but had reduced agility for some smaller local customers. We had gone too far with centralization for our local business.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

Our local teams had less autonomy and became slower to respond to business inquiries in this more dynamic part of the market. This particularly impacted our local food service customers who rely on speed of service, and we saw a loss of wallet share. Furthermore, own brand growth had been delivered alongside reduced engagement with branded suppliers. Some of these issues were starting to become clear early in 2024, and leadership were tasked with taking corrective action. However, the impact on the business was obscured by offsetting benefits, in particular, the transition to own brand and a strong holiday season at the 2024.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

The business ended 2024 with a view that performance was picking up, having seen volume growth with redistribution customers in the second half. In the 2025, our North America distribution business went through a very challenging inflection point, which became fully evident in April. The backdrop had become more challenging with continued pricing deflation and a difficult foodservice end market. Furthermore, leadership had not been fast enough to implement corrective actions and team morale had fallen. Volume growth with branded suppliers and own brand conversion fell well below our expectations.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

We had expected to win business on the back of the organizational changes, but this did not happen over this period. This was compounded by the loss of a higher margin category of business with a major ongoing customer. This category had supported a program which is no longer available in its stores. We did not win any large business over this period to offset this specific loss. Many of the offsetting benefits we had seen in 2024 fell away.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

We've seen higher operational costs with the business fixed cost base having increased with significant investments in people toward the 2024, higher inventory related costs as well as operating cost inflation. All these elements combined resulted in a significant drop in distributions profit versus the prior year. As a result, we took decisive action to improve performance during the half. Firstly, we changed the leadership of the business. Jim Bakuld, the head of North America, who has extensive experience within this operating company, took on direct leadership.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

He immediately sought to address team morale and removed the barriers to our local sales teams. I am spending a lot of time in this business, and we have been working closely with Jim in overseeing the change processes. Both Jim and I are committed to and aligned on how to fix these issues. We are also very confident that the issues are fixable. Importantly, we have the right strategy and organizational model.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

And as we see the results of actions taken, we are going to have a much stronger business at the other end. One of the most impactful steps taken so far has been to push more decision making authority back to the local level where appropriate. Instead of certain tasks being centralized, our 14 local market teams have regained control over pricing and margin for local customers as well as product availability. This has restored the agility and customer responsiveness that had eroded. We also took some cost out.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

At the same time, we focused on tackling the inventory position that had built up. We are refocusing our efforts on branded domestic suppliers who are core to our supply chain and making sure that we have a good balance of growth between their ranges and our own brand ranges as we continue to launch further products in complementary non branded categories. These swift measures are starting to pay off. The distribution team is reenergized and focused on turning the business around. Our service levels are now normalizing toward the usual high bundle standard even as we navigate some ongoing tariff related supply chain complications.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

Inventory levels are normalizing, which eases the pressure on operational costs and improves productivity of our warehouses. We saw our own brand strategy continuing to deliver with successful launches in Q2 and further launches planned toward the end of the year. While we saw fewer than expected business wins in the first half, the pipeline of wins is looking positive for the second half. And I am pleased to say that profitability momentum through the first half was in line with our expectations despite the challenging market. Importantly, these early indicators are positive and tracking in line with our plan.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

In the second half, we expect a moderated operating margin decline compared to the significant decline experienced in the first half. Although the benefit of some actions are not expected until well into 2026, I am confident in the progress we are making. This is the right strategy, and when executed, we expect to show continued market leadership, 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 programs, the business operating once again with high product availability and strong service levels, and importantly, a highly motivated team. Given the importance of this business to the future success of the group and my strong confidence in these actions the team has taken, we will become an even better Bunzl. Turning to Continental Europe, where the operating environment also remains challenging.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

We saw Continental Europe's operating margin decline by around 100 basis points over the first half, as had been expected. This follows trends already seen in the second half of last year. The decline was driven by France and certain online businesses. In France, we have seen the continued impact of deflation with prices normalizing in the cleaning and hygiene sector from the higher levels seen during the pandemic. This has been compounded by a weak economy.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

With revenue pressure, the impact has been amplified by a relatively high fixed cost base as well as continued operating cost inflation. Profitability of certain online businesses was also impacted by revenue softness with lower traffic and conversion of online marketing activities. Despite muted economic growth across Europe, there were brighter areas of performance. In particular, our Benelux business returned to growth following a challenging 2024, and Spain has been resilient against a good performance last year. Improvement actions are well underway in Europe, having been initiated in the second half of last year.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

We expect the net benefits from cost actions to start to accrue and expect our heightened focus on pipeline management to support net business wins in the second half. The region is also pursuing procurement opportunities such as consolidated own brand supply in certain regions. Furthermore, we face easy comparatives in the second easier comparatives in the second half. Together with our actions, this supports our guidance for reduced operating margin decline in the second half. Whilst we are very focused on improving performance in the second half, I wanted to reiterate that our long term compounding growth strategy remains unchanged.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

Many parts of our business are unaffected by our current challenges and are continuing to focus on delivery against this broad strategy. In the medium term, you can expect Bunzl to continue delivering growth organically and through value accretive acquisitions. So far in 2025, Bunzl has completed five acquisitions with a committed spend of around GBP 120,000,000. These acquisitions include our expansion into the attractive Chilean health care market as well as our first acquisition in Mexico since 2013. The breadth of these acquisitions continue to demonstrate the large number of lakes we continue to fish in.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

Despite a slower pace of deals this year due to macroeconomic uncertainty, the acquisition pipeline remains active and historically, Bunzl's M and A activity picks up quickly when conditions improve. We continue to have over 1,300 targets in our database. Andrew Mooney, our Corporate Development Director, looks forward to discussing our acquisition strategy and opportunity in more tail detail on the October 8 at our next investor seminar. Let me now pass you to Richard.

[Richard Howes, CFO at Bunzl]

Thank you, Frank, and good morning, everyone. With around 90% of adjusted operating profit generated outside The UK, our results on average were negatively impacted by currency translation of between 34% across the income statement. Starting with revenue, group revenue grew by 4.2% at constant exchange rates to £5,800,000,000, driven by net acquisitions, which delivered 4.9% to revenue. Underlying revenue declined naught point 2%, and there was a naught point 5% impact from an extra trading day in the prior year, net of a small benefit from excess growth in hyperinflation economies. Underlying revenue grew by naught point 6% in the second quarter, demonstrating an improvement on a challenging first quarter where we saw a decline of naught point 9%.

[Richard Howes, CFO at Bunzl]

Within underlying revenue, both price and volume were broadly stable for the half. Now turning to the income statement. Adjusted operating profit declined by 7.6% at constant exchange rates to £404,500,000. Operating margin reduced to 7% from 8% in the period last year at actual exchange rates. As Frank has mentioned, this margin decline was driven by the distribution business in North America and certain large businesses in Continental Europe.

[Richard Howes, CFO at Bunzl]

Adjusted net finance expense increased by £12,100,000 to £58,900,000 due to higher average net debt during the period. We continue to expect adjusted net finance expense of around a £120,000,000 for the full year. The effective tax rate was 26.4% compared to 25.5% last year, reflecting the absence of one off benefits from group UK group relief and tax provision changes included in 2024. We continue to expect around 26% to be the effective tax rate for the full year. Adjusted earnings per share fell by 10.6% at constant rates to 77.8p.

[Richard Howes, CFO at Bunzl]

The higher tax rate and increased interest charge more than offset the benefit of a reduced average share count reflective of the buybacks executed between the two periods. We have increased the interim dividend by north point 5% to 20.2p per share. Now turning to the business area performance. As you know, our performance in North America has been driven by our distribution business. While adjusted operating profit for the business areas as whole declined by 14.7% at constant exchange rates.

[Richard Howes, CFO at Bunzl]

Excluding the distribution business, North America's adjusted operating profit was more stable, albeit still impacted by the uncertain environment. We have seen some tariff related price increases during the second quarter and expect to see further increases later this year. Performance to date suggests tariff related price increases will provide some benefit in the second half, albeit impacted by the uncertainty we have seen and continue to see in tariff levels across Asia. Frank has covered the drivers of Continental Europe's 9.9% decline in adjusted operating profit at constant exchange rates, so let me turn to the other regions. Growth in The UK and Ireland has been driven by our acquisition of Nizbits, which was acquired in May.

[Richard Howes, CFO at Bunzl]

Over the first half, Nizbits has seen good sales momentum despite a more challenging trading environment. However, profitability was impacted by product mix with an increased weighting to heavy catering equipment such as fridges and freezers and slower than anticipated progress on maximizing the benefits of warehouse automation that the business invested in prior to acquisition. Elsewhere, our existing foodservice business businesses performed well over the period helped by customer contract renewals. The declining operating margin in The UK and Ireland has been driven by the dilutive impact of consolidating Nisbids, which tends to have a seasonally lower margin in the in the first half of the year compared to the second half as well as its profit performance over the half. We have also seen some margin impact in our clean and hygiene business from selling price deflation.

[Richard Howes, CFO at Bunzl]

We are, however, making very good progress on synergy projects in Nizabeth and expect these to largely benefit the second half. Our performance in the rest of the world has remained strong with underlying revenue growth driven by strong inflation in Latin America and moderate volume growth in Asia Pacific. In Asia Pacific, we saw good performance in health care, the biggest sector in the region, and overall, operating margins in the rest of the world continue to be strong. However, trading has become more challenging in the second quarter in Brazil, although businesses have had success in passing through some currency driven product cost increases to customers, they have not been able to do so fully in a weakening market. This has impacted Latin America's operating margin.

[Richard Howes, CFO at Bunzl]

Moving to cash flow. Cash conversion over the period was 97%, which is better than expected, supported by improved inventory levels through the second quarter. We generated £243,000,000 of free cash flow, a 22% decline year on year, reflective of the decline in our adjusted operating profit with the change in net interest and income tax payments broadly offsetting each other. During the period, we paid out £67,000,000 in dividends and made a net payment of £42,000,000 to buy shares for our employee benefit trust, leaving total cash generation prior to acquisitions, disposals, and share buybacks of a £134,000,000. Net of a £17,000,000 inflow from the disposal of r three safety in The US, cash outflow related to acquisitions was £31,000,000.

[Richard Howes, CFO at Bunzl]

All but one of the additional acquisitions announced year to date completed after the June 30. Turning to the balance sheet with comparisons made to the position at the 2024. Working capital increased by 25,000,000 as lower inventory and the benefit from currency translation were more than offset by an increase in receivables and reduction in payables, including the payment of share buyback commitments. Deferred consideration relating to acquisitions decreased by £15,000,000 to £243,000,000. Inclusively of the off balance sheet components, deferred and contingent consideration was 33 £336,000,000 compared to £375,000,000 at the 2024.

[Richard Howes, CFO at Bunzl]

This reduction is largely driven by payments in the period. Adjusted net debt, including deferred and contingent consideration to be paid on acquisitions, was £1,900,000,000, down £52,000,000 versus the 2024, but up £208,000,000 compared to the June 2024. Our adjusted net debt to EBITDA was 1.9 times compared to 1.8 times at the 2024. This headline ratio continues to exclude the impact of leases, and the increase reflects our reduction in EBITDA in the 2025 whilst being supported by a good 2024. Returns have been impacted by our performance over the period with a return on invested capital of 13.5% and a return on average operating capital of 38.8%.

[Richard Howes, CFO at Bunzl]

Despite the decline, our return on invested capital remains strong and broadly in line with the level achieved in 2019. Turning to capital allocation. The strength of Buzz's performance and high cash generation in recent years has resulted in low leverage. In the 2023, our leverage was 1.3 times compared to 2.1 times in the 2019 and compared to our target of two to two and a half times. This was despite an increase in average annual acquisition spend over recent years.

[Richard Howes, CFO at Bunzl]

As a result, last year, we committed to returning to a more appropriate leverage. At an adjusted net debt to EBITDA of 1.9 times today, we have relevered. This has been delivered through both an acceleration of capital allocation, including share buybacks over the last two twelve months, but also the weaker earnings we have delivered. Given macro uncertainty, we continue to believe leverage around two times is is appropriate. However, our capital allocation priorities remain unchanged.

[Richard Howes, CFO at Bunzl]

Given our anticipated level of acquisition spend this year, we are resuming our previously announced £200,000,000,000 share buyback. We had paused the buyback alongside our first quarter trading update to provide sufficient headroom for acquisition spend in the year in line with our capital allocation priorities. Given the lower level of spend year to date as well as our expectations for additional spend over the remainder of the year, we will complete the remaining £86,000,000 of share buyback by the end of the year. With this buyback and the anticipated additional acquisition spend, we expect leverage to be towards two times by the end of the year. Should we generate an annual free cash flow of 500 to £600,000,000, this would leave two hundred to three hundred million pounds of excess cash after dividends and employee trust and employee trust share purchases.

[Richard Howes, CFO at Bunzl]

With acquisitions supporting earnings growth, this allows us to continue to fund future acquisitions whilst maintaining our leverage. As part of our capital allocation framework, we commit we are committed to a progressive dividend policy, further building on our thirty two years of consecutive annual increases. We have announced a naught point 5% increase in our interim dividend today with continual annual growth supported by our conservative dividend cover. We expect our dividend cover to be around 2.4 times in 2025. Turning to the outlook.

[Richard Howes, CFO at Bunzl]

We have shared with you today the positive indicators that we are starting to see. These are in line with what we had expected, and as such, we reiterate the outlook we published in April and at the pre close in June. We continue to expect moderate revenue growth in 2025 at constant exchange rates driven by announced acquisitions and broadly flat underlying revenue. We expect group operating margin for the year to be moderately below 8% compared to 8.3% in 2024. This guidance factors in a moderation of year on year operating margin decline in the second half compared to the approximately 100 basis points decline seen in the first half.

[Richard Howes, CFO at Bunzl]

This confidence is driven by the expected benefit of actions taken in North America and Continental Europe, the easier comparatives we see in Continental Europe, and the benefit of Nisbet synergies. We also note that the group's second half operating margin is seasonally higher. And as Frank has already mentioned, trading in July is consistent with our expectations for the second half. I will hand you back to Frank for some final comments before we move to q and a.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

Thank you, Richard. I would like to conclude the formal part of this presentation by reiterating my two earlier points. Firstly, our priority is fixing the issues that have impacted the group. I am confident in the actions we are taking. And while it's early days, these actions are delivering as expected.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

Secondly, we are committed to building further on Bunzl's historic success and returning to the more consistent performance that you are used to. Thank you for your attention. We are now very happy to take any questions.

[Operator]

Thank you, Frank. Our first question comes from Rory McKenzie from UBS. Your line is open Rory. Please go ahead.

[Rory Mckenzie, Executive Director at UBS Group]

Good morning all. It's Rory here. Two questions, please. First, I wanted to ask for more detail on the cost base plans for North America and Europe. If we assume that gross margins were pretty stable in each region, I think SG and A rose by about 10,000,000 to $20,000,000 year over year in local currencies for H1.

[Rory Mckenzie, Executive Director at UBS Group]

I guess, does that sound right, firstly? And then in terms of modeling that from here, were there any one off costs you charge in H1 that will recur in H2? And could you also quantify the savings you expect to make from your actions, please? And then secondly, can you talk about the pricing environment? It sounds like H1 overall was still marginally deflationary.

[Rory Mckenzie, Executive Director at UBS Group]

But can you quantify the price increases that you recently put through and the potential impact on H2? And then just give a bit more background on how you're managing The US in particular given the tariff volatility there. Thank you.

[Richard Howes, CFO at Bunzl]

Yeah. Okay. Rory, morning. In terms of in terms of our cost base, yes, we have seen we have seen an increase in in in in OpEx across the year. It's largely been inflation driven.

[Richard Howes, CFO at Bunzl]

I think we've done a good job actually of of mitigating, you know, quite a lot of that through through the actions we've taken, but also some benefits in freight that we've seen particularly in North America. So overall, I think, actually, our s g and a has been has been well managed. As to one off costs, there have been some costs of the the cost takeout exercise we've seen in North America and in Continental Europe. I think given the the the majority of this sits in North America and given the fluid labor market there, you can assume that the costs associated with this are in the low single digit millions. And, of course, they've all been taken above the line in in in as part of our trading trading results.

[Richard Howes, CFO at Bunzl]

So that's the cost piece. In terms of pricing, yes, we have seen some easing of deflation across the first half. That has largely been mostly in North America, albeit we have seen some elsewhere. And part of that will be that we have put prices up in with our safety customers primarily in in the second quarter. Now that really happens because of the delays and the uncertainty associated with tariff levels.

[Richard Howes, CFO at Bunzl]

It has taken place later in the quarter than, perhaps everybody anticipated, which means actually the impact on the first half is relatively limited, and there will be further benefits to come from from tariffs in the second half, albeit I reiterate that the the level of uncertainty remains high. Still not clear on tariff levels in China, for example. And as a consequence, even though it is a tailwind, I I I would contextually make it clear that it's not it's not a big tailwind. It's it's a relatively modest number, I would expect.

[Rory Mckenzie, Executive Director at UBS Group]

Thank you. And just coming back on on the cost base. It it doesn't sound like what you're saying that there's any kind of large absolute cost reductions you expect to make over the next six, twelve months. It's more about repositioning the business to drive growth. Is that fair then in the context of what you just said?

[Richard Howes, CFO at Bunzl]

Well, I think we I think it's true to in terms of actions taken, we have already taken a significant amount of action, particularly in North America towards the during q one, towards the end of q one, which we saw the benefit of in q two. That is that is addressing structure. It is addressing number of people in the business, but it's also addressing disruption related costs associated with higher levels of inventory. So we have seen a significant reduction in the amount of storage trailers we've used and third party storage, which is expensive, and it is inherently more disruption more disruptive to productivity. So as inventory has come down, we've also seen an easing of that cost pressure.

[Richard Howes, CFO at Bunzl]

Those two together, you know, has been quite meaningful in the second half and will be additive in the second half.

[Rory Mckenzie, Executive Director at UBS Group]

That's great. Thank you.

[Operator]

Our next question comes from Ryan Flyte from Jefferies. Ryan, your line is open. Please go ahead.

[Ryan Flight, Equity Research Analyst at Jefferies]

Yeah, good morning. All three from me, if I may, please. First one, you've noted reduced engagement from suppliers, largely on the back of your focus on own brand. I wondered if you could update us on this engagement and your relationship with suppliers and how you strike the balance on own brand. It seems that you're still kind of pushing the own brand penetration and then just how you strike that balance.

[Ryan Flight, Equity Research Analyst at Jefferies]

Second one, you've got your kind of shorter term leverage target at the lower end of the previous range, so two times. I wondered if you could kind of build out on what you really need to see to move back to the two to 2.5 times range. And then the third one, just on M and A, really. I know you've kind of noted the tougher macro environment. But is there anything else for us to be aware of?

[Ryan Flight, Equity Research Analyst at Jefferies]

Are you being a little bit more prudent? Is there anything on valuation, competition? That would be really useful.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

Okay. Let me take the first and the last one. On engagement and supplier, yes, so what we've seen during that sort of process in the business where things got a little bit too centralized, I think the you know, we we we got a bit too black and white in terms of introducing some of the own brands, which meant that at at some points went at the expense of, let's say, the branded suppliers. Now, that's quite a nuanced situation also because in some cases, let's say, the branded suppliers in The U. S.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

Also have some older machines and purely in an international context are not always competitive. So the market is driving you sometimes towards these kind of solutions. But if you look at a large business and a large product range that we have, I think the approach now, which is the right approach, where we really look at, okay, what are product categories that are, let's say, unbrandable and unbrandable and having very little impact on the preferred branded suppliers. And then there's also a large amount of volume that, let's say, sitting a little bit in the middle where we are not selling own brands and we're also not selling products from preferred suppliers where the aim is to move more towards preferred suppliers. And we've seen, let's say, we've seen this operate very successfully in other markets of Bunzl that it's actually very well possible to, you know, grow your own brands and at the same time also grow your preferred supplier brands.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

And a lot of work has been going on in the last couple of months in terms of engagement on top level, on regional level, but most importantly, on salesperson level, having these people talk to the, you know, the salespeople from the branded suppliers, making combined plans, and that is really a focus now for the for the second half. You know, Bunzl is is a powerhouse in The US market. We are a really big company. So let's say the the branded suppliers are actually very excited that Bunzl is gonna adopt a slightly more nuanced approach, and they're very keen to work with us and continue to grow and pick up the right strategy. So you feel good about the opportunity to grow with our preferred suppliers.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

And at the same time, as we said, we had some good launches in the second half. We have more own brands to come in, and it's slightly more in categories that are not so much part of the product range of our our branded supplies, like straws, for instance. It's a it's slightly more commodity group where already importers and people play. We've got a great opportunity because we are so big, we have so much scale. And, you know, when we bring that in, import that on our own brands, that's a that's a a real opportunity.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

In terms of M and A, yeah, the pipeline is is is good. Obviously, you know, the the the situation in the world is is more dynamic. That means that sometimes that, you know, people's business is a little bit under pressure given all what is happening, and you just tend to see that some of these processes are done a little bit slower. You know, we sometimes pause. We're not convinced about the, let's say, the sustainability of some of the profit trends we've seen in the last couple of years.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

But still very, very strong pipeline, a lot of conversations happening. But at uncertain times, you just tend to see periods where you close a little bit less deals. But I'm not worried about this at all. It can be a little bit lumpy. Sometimes you have a little lower spend, and and sometimes you spend, like, 770,000,000.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

So this this happens, and we're still very well positioned. You know, people like bonds with 1,300 opportunities, and you'll find out even more about this all at the at the upcoming seminar with Andrew Moni.

[Richard Howes, CFO at Bunzl]

And, Ryan, on the short term leverage point, yes, back in in April, we we indicated that rather than being at the moment at in the at 2 to 2 and a half, which is the, you know, the typical bundle range over many, many years, that we would be we'd focus on being more towards the lower end of that range given the level of macro uncertainty that is that was there at the time, I think it's still still with us today. What will it take to get back to the normal the more normal range? I think just a bit of evolution of time and, hopefully, things settling down a bit will give us will put us back to that point. But broadly, you know, we as I said, we have relevered. We've relevered for 1.3 up to nearly two times already. So, actually, there's not much further to go.

[Operator]

Thank Our next question comes from Will Kirkness from Bernstein.

[Will Kirkness, MD & Head - European Business Service Equity Research at Bernstein]

I've got three questions, please. Firstly, just going back to Rory's question. I wondered if you could provide the gross margin movement year on year for the first half. And secondly, in The U. S, having now sort of partly centralized and going back to old model, I wonder if you're sort of running a slight sort of double cost base and whether so whether there's a the margin potential in The U.

[Will Kirkness, MD & Head - European Business Service Equity Research at Bernstein]

S. Has been structurally impaired or whether you still have the same sort of aspirations for the margin there? And then lastly, just on buyback. Obviously, you were looking at €700,000,000 for 2026 and 2027, which is also suspended at the Q1 update. I just wondered if you could give an update on these there. Thanks very much.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

Let me take the second question on The U. S, then Rich can take the other ones. Yes, on The U. S, let's say, we're not moving to the old back to the old model with the general managers. And we so we have adopted the sales and operations model, but basically implemented and executed that a little bit too much into black and white way that had impact on local business.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

So we are basically fine tuning that model, and we have that model running in Australia and in Europe and in the larger businesses, very well known systems. So that will sort of continue to operate in a much better way. But within that business, we have allowed to, you know, have more agility and empowerment into these 14 local teams. So these are all very experienced Bunzl, you know, who can make very, you know, rational business decisions on margins, on availability, on getting suppliers in and stuff like that. So I'm not moving back to the old model because because of the strategic reasons I mentioned. We wanted to make a change in 2019. We believe it's the right change. We see the benefit with the larger customers.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

They're actually quite pleased about all these changes, and we are now modifying it for the smaller customers. And and let's say, the reactions from the market and from our salespeople are are very positive. So in terms of the double cost, some has been centralized. Some of the cost was not extra cost because we we had, let's say, slightly more local people sitting in more central teams, sometimes also virtually. So but it's fair to be fair to say that some of the costs moving back to some of the roles back to the regions had some impact.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

And that's why in the second quarter, we also took cost out to to rectify that kind of situation. So there's no no double cost left.

[Richard Howes, CFO at Bunzl]

And, Will, on gross margins, you can you can assume the gross margin percentage is slightly up h one twenty five on '24, but that's very much driven by acquisitions. Obviously, we've got Lizbix for a full six months in the 2025 compared to about one month in 2024. As to the the 700,000,000 commit we made this time last year, well, look, as we laid out at the time, that was very much part of us releveraging the business into the target range of two to two and a half, which at that point in time, we anticipated taking being a taking until 2027 to play play out. Obviously, since that time, we have seen a change in our in our margins, and we've had to and we've seen, obviously, a a more challenging first half than than than was expected. So, essentially, we have relevered at least to the lower end of our range during this period.

[Richard Howes, CFO at Bunzl]

And to the point that and the question that Ryan made, you know, we will we will go back to the range two to two and a half, but essentially or largely, we have relevered within this period, which means that going forward, as I pointed out in this in our in in the presentation, you know, we think m and a is is going to be the main driver of our of our cash our free cash generation or the main use of our free cash generation after after a dividend.

[Will Kirkness, MD & Head - European Business Service Equity Research at Bernstein]

Okay. Thanks very much.

[Operator]

Our next question comes from Suesseni Barasini from Goldman Sachs. Your line is open. Please go ahead.

[Suhasini Varanasi, Vice President at Goldman Sachs]

Hi, good morning. Thank you for taking my questions. Just a couple for me, please. You've mentioned in your remarks that organic growth trends in July have been in line with your expectations. Could you please clarify whether that growth in July was similar to Q2, which seems to have improved a little bit versus Q1 on an underlying basis? And maybe just one on clarification, please. Think

[Richard Howes, CFO at Bunzl]

when we say when we talked about July, we were actually talking more to not just organic revenue. So more to the point that, you know, that, obviously, the second half requires a margin improvement. So the bigger point that we were trying to make in in giving you a sense of what July has traded to be is actually that it's in line with our, you know, profit and margin expectations as much as it is it is revenue. So take it as a full income statement read rather than just an organic one. As to deferred consideration and contingent consideration payout, you should assume that the majority of the of the payments that of the 300 plus million that we have on the balance sheet and being accrued in contingent consideration will be paid out more in '27 and '28.

[Richard Howes, CFO at Bunzl]

There'll be a relatively light amount in in in 2026, sort of mid tens of millions. You can see that in the notes of the accounts, we do provide a a a time line for for when these payments will be made, but majority will the vast majority will come out in 2728.

[Suhasini Varanasi, Vice President at Goldman Sachs]

That's very clear. Thank you. But just to go back on the first question, is it possible to provide some color on how the underlying organic trends have evolved in July? I mean, just want to understand if there have been any implications from tariffs, prebuy, postbuy, whatever, how that has affected or inflation, for example, how that has affected the underlying organic trends? Thank you.

[Richard Howes, CFO at Bunzl]

Yeah. Nothing nothing around prebuying. We don't we haven't seen that as a trend. A lot of the work we've a lot of the price increases we put through in our safety business in North America, in particular, have been very much working with customers to to, you know, to make sure that we pass the right amount at the right time. As a consequence, we haven't really seen any disruption in in people buying ahead in any meaningful sense.

[Richard Howes, CFO at Bunzl]

So it's not that. But I think it's probably better generally, I think, for for us to have given you a full income statement view that both profit and margin in in July are consistent with what we need for the for the full full year. You can you can assume the same is true for revenue growth as well.

[Suhasini Varanasi, Vice President at Goldman Sachs]

Thank you.

[Operator]

Our next question comes from David Broxton from Deutsche Numis. Your line is open. Please go ahead.

[David Brockton, Equity Research at Deutsche Numis]

Thanks. I have three questions as well, which will hopefully be relatively quick. Firstly, in terms of the Q2 underlying revenue improvement, it looks stronger than I previously anticipated and note that you touched on some tariff pricing benefit. Can you just confirm whether you saw any volume improvement through Q2 on Q1? That's the first question.

[David Brockton, Equity Research at Deutsche Numis]

The second question is just on the North American turnaround. Clearly, rebuilding local sales team effectiveness is going to take time. Can you just give a bit more detail on where you are in terms of recruiting people to the extent that's needed and how that effectiveness is improving to date? And then the final one is just on Europe, where you touched on pressure, revenue pressure with certain online businesses. Apologies if you mentioned it through the transcript, could you just elaborate on what precisely you've seen there for those online businesses? Thank you.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

Yeah. So maybe you can take the first one. I'll take local sales and online. Yes.

[Richard Howes, CFO at Bunzl]

David, yes, I think you can you can take it that that q two was a bit better than than we'd expected. But I but I think we should keep it in context because we are lapping some very, very soft comparators in 2024, and we will see tougher comparatives at the revenue line in the second half when, actually, we we traded pretty well and saw volume growth. To your point on on your tariff point, most of the tariff went through in in q two, mid to late q two. Therefore, in terms of impact on inflation or deflation, that that it's it's it's has less it's had less of an effect in q two. There will be more of an effect of that in in in h two as as long as these tariffs stick, of course.

[Richard Howes, CFO at Bunzl]

On your point on volume, yes. Look. I think you can assume there has been a an improvement in volume between q two and and q one. Again, the point around comps is is important because, you know, we very much need to see that improve in the second half. But I think it's encouraging that and the positive signs we're seeing in our North American distribution business around potential wins in the second half, should they arrive, would certain would certainly help that.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

And your question on on local sales, good question. So, actually, we we we haven't lost a high number of salespeople. We've lost some people, but more, let's say, recently, if we look at the last six to nine months, our staff turn has been normal compared to previous periods, especially in our redistribution business. So that that is encouraging. The problem was not so much around losing people.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

The issue was more around we've taken the weapons out of their hands to be able to be successful. And so we've given these weapons back by giving them own brands, good cost prices, but most of all, local speed of execution decision making. And so it's the same salespeople. Actually, for the for for these areas where we lost some people, we have a a very successful sales team graduate program with more than sales 10 graduates in it. And these people actually have been going into the markets over time also.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

So it's not so much sort of filling the vacancies. There haven't been a huge amount of vacancies. It's more like how do we make sure that all these experienced people we have that we can make them effective by you know, if they need a price, they can get it within an hour instead of in five days. They get the support from the local management. They can bring in a supplier.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

They can, you know, do stuff with suppliers. So that was more, let's say, the issue. In terms of Europe online, I think we we have some very successful businesses in this area. One of the larger businesses has been adopting a strategy of implementing a marketplace, which effectively means that outside the areas of where you deliver products from from your own warehouse, you basically load other suppliers who, on your behalf, selling or delivering these products directly. And, basically, the business takes a commission on that because we've been uploading tens of thousands of products in a short period of time that had impacted some of the speed of the of the of the tools.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

And we have fixed that now. So that is working again in an efficient way. So we expect in the second half these businesses also to improve over time.

[Operator]

Our next question comes from Carl Green from RBC.

[Karl Green, Director - Equity Research at RBC Capital Markets]

I've got two questions. Just in terms of trying to assess and track the improvement program. You've indicated the service level and inventory levels are normalizing. Just how far off the optimal level are both service levels and inventories, please? And any quantification around that would be helpful.

[Karl Green, Director - Equity Research at RBC Capital Markets]

Ditto, any kind of comments around where business wins need to get to, to be kind of back on track? And then the second question is really around the M and A slowdown. I think, Frank, you did indicate that part of that is Bunzl deciding to pause certain processes. So the question would be, what are you seeing in the books of targets that are giving you that sort of second port of thoughts, making you think twice about pushing forwards? I mean, the basis that Bunzl typically targets fairly resilient businesses, what kind of businesses are seeing a slowdown at the moment? That would be helpful.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

Yes. Just on M and A. So yes, you do see it sort of you know, relatively broadly in in in different sectors. I have to say, certainly, in in areas like food service. You see in The US, for instance, that you can see it also, you know, some of the results that Cisco and US food service came out with, you know, softer softer numbers on on volume.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

So you you see that also when you look at acquisitions. And in that context, actually, I'm quite pleased in terms of how we are doing in our food really business as well. So it's it's it's slightly broader. I think it's an uncertain time, so people are, you know, a bit more uncertain. Sometimes they they wait a bit longer with, you know, putting their businesses out for sale and, you know, hope for for a better time.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

So that's all relatively normal in terms of what is what is happening. And, Carl,

[Richard Howes, CFO at Bunzl]

on on the inventory levels and service levels, it this is a North America comment. They I think the team have done a very good job actually of bringing inventory down quite significantly in second quarter. This is in part because, of course, it was causing us cost problems. And, you know, we we've effectively brought a lot of new own brand inventory into into the into North America, particularly the second half of last year, and that can mean you're almost doubling up on inventory in certain areas. And and when you're establishing new ranges, it's never too clear exactly which markets, of course, The US is a the collection of markets, which of those will see most pick up quick.

[Richard Howes, CFO at Bunzl]

So there's also a period having to settle inventory into the right part of the country, which not only costs us in terms of inventory holding, but also freight moving the product around. I think that is increasingly getting closer to what we would feel is optimal, and we've certainly seen the benefit of some of the cost reductions in the second quarter and expect to see the same in the in the in the in the second half, but also allowing us to service what have been actually some quite successful home brand launches in q two, which equally will help us in the second half. So I think we're pretty much there, but, you know, it's constant vigilance in this area.

[Karl Green, Director - Equity Research at RBC Capital Markets]

Okay. Thanks very much. And so just following up on on my first question, when would you say the earliest point in time would be when you can declare mission accomplished on the turnaround program?

[Frank Van Zanten, CEO & Executive Director at Bunzl]

I would say, you know, I I feel I feel really good about the changes we are making already and the impact on our people and, you know, how effective we are in terms of, you know, winning winning business, launching own brands and stuff like that. I'd say the the I think for me, the proof on the putting is really to to get, you know, to get to this sort of more improved point where we all started the process for in terms of becoming more effective in terms of our sales growth and and our own brand development. So, you know, I I expect that to to, you know, happen somewhere maybe in the 2026 where, you know, everything runs more smoothly, and that also translates into good growth and winning back business.

[Operator]

Our next question comes from Dylan Jones from KC.

[Dylan Jones, Equity Research Analyst at Kepler Cheuvreux]

Just a quick follow-up. The statement around expecting some benefits in North America to materialize well into 2026. So can I just clarify, are we alluding to sort of organic revenue growth here from the winning back of business sort of following this restructuring? Or are there also some benefits in the cost base that you're calling out that won't come through until late twenty twenty six? And then just one last question from me.

[Dylan Jones, Equity Research Analyst at Kepler Cheuvreux]

So I suppose what sort of gives you the confidence now that you sort of struck that right balance between the centralized and local autonomy in the North American business? So I also take the point earlier that it sounds like the operating model has been unwound from centralization towards sort of more similar to the model in Europe and the rest of the world. But is there anything sort of structurally, fundamentally different in the North American market that needs to sort of be considered or or monitored as you move towards this new operating structure?

[Frank Van Zanten, CEO & Executive Director at Bunzl]

Yes. So that's a good question. Yes. So let's say, the one thing that is slightly different in The U. S.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

Market towards the other markets is that we are there in a redistribution market. And so outside of The U. S, we are selling more direct to hotels, restaurants, you know, catering, theme parks. And here we are in a two tier system where we're selling to the redistribution market. And especially the local part of that market is very, very you know, you need to be very proactive, fast response because they are operating on the on behalf of their customers.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

So giving you an example, if you are a local, let's call it a small Cisco food distributor business, and they're selling to a pizzeria shop, and the pizzeria shop wants to have a specific pizza box or they're looking for certain, you know, Christmas articles near the end of the year, which they don't, you know, sell a lot of, then that question gets to Bunzl because the food distributor can't stock all these products. There's, you know, maybe a 100,000 products around the market. So the food distributors, they have 90% of what they sell is food. So they they focus on stocking, let's say, the fast moving items, maybe the napkin, the white napkin themselves, but a lot of these other items, they're relying on distributors for to fill that in because otherwise, they need to have a warehouse that's five times bigger than they they operate on. So that's a bit different, but that also dictates how fast you need to be to be able to be successful. And that that is what actually, you know, we put back into into the business, and it's largely working because, you know, most of the people that were used to work in that old model and, you know, are used to that responsiveness, you know, can deliver that. But the issue that was the case is they were not empowered to make that decision anymore because it was made centrally. We've now put that all back, and the indicator for me is is that, let's say, stock levels are coming down, our service levels are up, Our people are happy.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

I'm sitting down. You know, I'm often in the in The US. I'm inviting the sales teams to come and see me. Every time I'm there, I'm meeting a sales group, and you just get direct feedback upon, yeah. This is this is really operating, and I want this, and I want that.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

My customer's happy, and I'm happy. Still, we're you know, we have still improvements to make, and we monitor them, and we, you know, we knock them off one by one. So it's very clear to see if something, you know, is starting to get better, and that that that is what I'm seeing. But, you know, if you have customers, they also buy certain categories, and they're not just shifting that every week, you know, when somebody comes in. So there's an element of, let's say, time, let's say, one one year, eighteen months that more of these categories are being reviewed again, certainly, you know, by slightly bigger customers as well.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

And that's the time where we will be there to try to sort of win back. So we have some early successes. We've we also, you know, get some some early successes in the second half already, which is encouraging, you know, and we are focusing on, you know, getting more done in the in the second half. Because Bunzl is still seen as as the market leader in redistribution. We're still dealing with all these categories.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

We just lost a bit of share of wallet, but we are trying to win back, supported by more own brands also coming in.

[Richard Howes, CFO at Bunzl]

And, Dylan, on that, the the comment about expecting benefits that from certain actions well into 2026 was something we said in in April, and it was to make a point that we have a range of things happening here. Some short term actions that Frank has talked about that have that have a lot of which have happened and taken place in either late q one or in q two, but there are others which are likely to take a longer time longer to to play out. We're mainly thinking about winning back business we've lost there. It's not a cost point. You know, we think we've largely done the cost changes we need to make. So think of it more about winning back some of that volume we lost being majority of what that that comment relates to.

[Dylan Jones, Equity Research Analyst at Kepler Cheuvreux]

Very clear.

[Operator]

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

[Frank Van Zanten, CEO & Executive Director at Bunzl]

Yes. Thank you all for joining. I think it has been quite an unusual half year for Bunzl, you know, impacted strongly about, you know, some of the things that happened in our US business. Just right like to remind people, this business represents 30% of our business. Bunzl has always been a very resilient, predictable business, about a 150, a 160 portfolio businesses in different markets and regions giving us that resilience.

[Frank Van Zanten, CEO & Executive Director at Bunzl]

With this large business, we had a problem that pushed us out of resilience. I am confident that we will be fixing and are fixing the issues. It's gonna take a little bit time also to win back also, but I feel good about where we're going. And when fixed, I expect to have a a better business on the other side, and the group will be the same resilient, predictable, compounding business as you're used to. Thank you all, and have a good day.

Participants

Executives

• Frank Van Zanten, CEO & Executive Director
• Richard Howes, CFO

Analysts

• Rory Mckenzie, Executive Director at UBS Group
• Ryan Flight, Equity Research Analyst at Jefferies
• Will Kirkness, MD & Head - European Business Service Equity Research at Bernstein
• Suhasini Varanasi, Vice President at Goldman Sachs
• David Brockton, Equity Research at Deutsche Numis
• Karl Green, Director - Equity Research at RBC Capital Markets
• Dylan Jones, Equity Research Analyst at Kepler Cheuvreux