Bunzl Aktie

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.

Good morning and thank you for joining Bunzl's 2025 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 Howes, our CFO, will walk through our financial performance, leverage and outlook. We will then move to Q&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. 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%. 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 1.9x, 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. 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 5 acquisitions with a committed spend of approximately GBP 120 million. 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. In the first few months of the year, we also executed GBP 114 million of an announced GBP 200 million 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, GBP 86 million 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. 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 declining 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. 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.

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. It is largely -- it's largely services, grocery and customers and foodservice 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 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. We take these core strengths and apply them to our 2 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 contracted 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. It is slightly different for foodservice 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 nonfood items. And so they leverage the scale and of ranges that distributors and importers such as Bunzl provide on that nonfood 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. Overall distribution generates around 1/3 of its revenue through local customers with revenue weighted towards foodservice. The other 2/3 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 through the strategic and structural changes we have been implementing in this business over the last 5 years. In 2019, we were operating a branch-based model, which meant that 40 general managers across the business were each managing the entirety of their own operations locally from sales right through all of the supporting processes. 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's 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. 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 through 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 Distribution's operating margin.

So strategic actions were sketched out for the business. 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 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. 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 deliver a stronger platform for growth and improve margins. However, the challenges have been in the execution, as we will talk about shortly. Initially, we were seeing some positive progress. By the end of 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 products' price point and quality. We have 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. 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 had improved consistency for large accounts but have reduced agility for some smaller local customers. We had gone too far with centralization for our local business. 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 foodservice 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 the benefits, in particular, the transition to own brand and a strong holiday season at the end of 2024. 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 first half of 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. 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. We've seen higher operational costs with the business fixed cost base having increased with significant investments in people toward the end of 2024, higher inventory-related costs as well as operating cost inflation. All these elements combined resulted in a significant drop in Distribution's 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 McCool, the Head of North America, who has extensive experience within this operating company, took on direct leadership. He immediately sought to address team morale and remove 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. 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. 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 nonbranded 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 towards the usual high Bunzl standard even as we navigate some ongoing tariff-related supply chain complications. 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. 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. 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 & Hygiene sector from the higher levels seen during the pandemic. This has been compounded by a weak economy. 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 second half of 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. 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. 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 5 acquisitions with a committed spend of around GBP 120 million. 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.

Despite a slower pace of deals this year due to macroeconomic uncertainty, the acquisition pipeline remains active and, historically, Bunzl's M&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 detail on the 8th of October at our next investor seminar.

Let me now pass you to Richard.

Thank you, Frank, and good morning, everyone. With around 90% of adjusted operating profit generated outside the U.K., our results on average were negatively impacted by currency translation of between 3% and 4% across the income statement. Starting with revenue. Group revenue grew by 4.2% at constant exchange rates to GBP 5.8 billion, driven by net acquisitions, which delivered 4.9% to revenue. Underlying revenue declined 0.2% and there was a 0.5% 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 0.6% in the second quarter, demonstrating an improvement on the challenging first quarter, where we saw a decline of 0.9%. 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 GBP 404.5 million. 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. Adjusted net finance expense increased by GBP 12.1 million to GBP 58.9 million due to higher average net debt during the period. We continue to expect adjusted net finance expense of around GBP 120 million 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 -- U.K. 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. 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 2 periods. We have increased the interim dividend by 0.5% 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 area as a whole declined by 14.7% at constant exchange rates, 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 U.K. & Ireland has been driven by our acquisition of Nisbets, which was acquired in May last year. Over the first half, Nisbets 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 businesses performed well over the period, helped by customer contract renewals.

The declining operating margin in the U.K. & Ireland has been driven by the dilutive impact of consolidating Nisbets, which tends to have a seasonally lower margin 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 Cleaning & Hygiene business from selling price deflation. We are, however, making very good progress on synergy projects in Nisbets 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 continued 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.

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 GBP 243 million 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 GBP 67 million in dividends and made a net payment of GBP 42 million to buy shares for our employee benefit trust, leaving total cash generation prior to acquisitions, disposals and share buybacks of GBP 134 million. Net of a GBP 17 million inflow from the disposal of R3 Safety in the U.S., cash outflow related to acquisitions was GBP 31 million. All but one of the additional acquisitions announced year-to-date completed after the 30th of June.

Turning to the balance sheet with comparisons made to the position at the end of 2024. Working capital increased by GBP 25 million 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 GBP 15 million to GBP 243 million. Inclusive of the off-balance sheet components, deferred and contingent consideration was GBP 336 million compared to GBP 375 million at the end of 2024. This reduction is largely driven by payments in the period.

Adjusted net debt including deferred and contingent consideration to be paid on acquisitions was GBP 1.9 billion, down GBP 52 million versus the end of 2024 but up GBP 208 million compared to the end of June 2024. Our adjusted net debt-to-EBITDA was 1.9x compared to 1.8x at the end of 2024. This headline ratio continues to exclude the impact of leases and the increase reflects our reduction in EBITDA in the first half of 2025, whilst being supported by a good second half of 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%. 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 Bunzl's performance and high cash generation in recent years had resulted in low leverage. In the first half of 2023, our leverage was 1.3x compared to 2.1x in the first half of 2019 and compared to our target of 2 to 2.5x. This was despite an increase in average annual acquisition spend over the recent years. As a result, last year, we committed to returning to a more appropriate leverage. At an adjusted net debt-to-EBITDA of 1.9x today, we have relevered. This has been delivered through both an acceleration of capital allocation, including share buybacks over the last 12 months but also the weaker earnings we have delivered. Given macro uncertainty, we continue to believe leverage around 2x is appropriate. However, our capital allocation priorities remain unchanged.

Given our anticipated level of acquisition spend this year, we are resuming our previously announced GBP 200 million 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 GBP 86 million of share buyback by the end of the year. With this buyback and the anticipated additional acquisition spend, we expect leverage to be towards 2x by the end of the year.

Should we generate an annual free cash flow of GBP 500 million to GBP 600 million, this would lead GBP 200 million to GBP 300 million of excess cash after dividends and employee trust share purchases. 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 are committed to a progressive dividend policy, further building on our 32 years of consecutive annual increases. We have announced a 0.5% increase in our interim dividend today with continual annual growth supported by our conservative dividend cover. We expect our dividend cover to be around 2.4x in 2025.

Turning to the outlook. 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 preclose 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. 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 Nisbets' 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'll hand you back to Frank for some final comments before we move to Q&A.

Thank you, Richard. I would like to conclude the formal part of this presentation by reiterating my 2 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. 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 Instructions] Our first question comes from Rory McKenzie from UBS.

It's Rory here. Two questions, please. First, I wanted to ask some more detail on the cost base plans for North America and Europe. If we assume that gross margins were pretty stable in each region and I think SG&A rose by about GBP 10 million to GBP 20 million year-over-year in local currencies for H1, 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 won't 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. But can you quantify the price increases that you recently put through and the potential impact to H2? And then just give a bit more background on how you're managing the U.S. in particular given the tariff volatility there.

Yes. Okay, Rory. In terms of our cost base, yes, we have seen an increase in OpEx across the year. It's largely been inflation driven. I think we've done a good job actually of mitigating quite a lot of that 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 SG&A has been well managed.

As to one-off costs, there have been some costs of the cost takeout exercise we've seen in North America and in Continental Europe. I think given the majority of this is in North America and given the fluid labor market there, you could 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 as part of our trading results. 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 with our safety customers primarily in the second quarter. Now that really happens because of the delays and the uncertainty associated with tariff levels. 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 tariffs in the second half, albeit I reiterate that 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 would contextually make it clear that it's not a big tailwind. It's a relatively modest number I would expect.

And just coming back on the cost base. 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 6, 12 months. It's more about repositioning the business to drive growth. Is that a fair then in the context of what you just said?

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 end -- during Q1, towards the end of Q1, which we saw the benefits of in Q2. That is addressing structure. It is addressing a 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 disruptive to productivity. So as the inventory has come down, we've also seen an easing of that cost pressure. Those 2 together has been quite meaningful in the second half and will be additive in the second half.

Our next question comes from Ryan Flight from Jefferies.

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 kind of 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.

Second one, you've got your kind of shorter-term leverage target at the lower end of the previous range, so it's 2x. I wondered if you could kind of build out on what you really need to see to move back to the 2 to 2.5x range. And then the third one, just on M&A, really. I know you've kind of noted the tougher macro environment. But is there anything else for us to be aware of? Are you being a little bit more prudent? Is there anything on valuation, competition? That would be really useful.

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 -- we got a bit too black and white in terms of introducing some of the own brands, which meant that at some point 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. also have some older machines and purely in a 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 is where is -- where we really look at, okay, what are product categories that are, let's say, unbrandable and having very little impact on the preferred branded suppliers. And then there's also a large amount of volume, 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 grow your own brands and at the same time, also grow your preferred supplier brands.

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 salespeople from the branded suppliers, making combined plans and that is really a focus now for the second half. Bunzl is a powerhouse in the U.S. market. We are a really big company. So let's say, the branded suppliers are actually very excited that Bunzl is going to 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'll feel good about the opportunity to grow with our preferred suppliers. 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 branded suppliers, like straws, for instance. It's a 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 when we bring that in, imported and our own brands, that's a real opportunity.

In terms of M&A, yes, the pipeline is good. Obviously, the situation in the world is more dynamic. That means that sometimes 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 then a little bit slower. We sometimes pause if we're not convinced about, let's say, the sustainability of some of the profit trends we've seen in the last couple of years. But still very, very strong pipeline, a lot of conversations happening. But -- and 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 sometimes you spend like GBP 770 million. So this happens. And we're still very well positioned. People like Bunzl. We have 1,300 opportunities. And you'll find out even more about this all at the upcoming seminar with Andrew Mooney.

And Ryan, on the short-term leverage point, yes, back in April, we indicated that rather than being at the moment in the 2 to 2.5, which is the typical Bunzl range over many, many years, that we would be -- we would 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 and I think is still with us today. What will it take to get back to 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, we -- as I said, we have relevered. We relevered from 1.3 up to nearly 2x already. So actually, there's not much further to go.

Our next question comes from Will Kirkness from Bernstein.

I've got 3 questions, please. And 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 the 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.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 GBP 700 million for '26 and '27, which was also suspended at the Q1 update. I just wondered if you could give an update on views there.

Let me take the second question on the U.S., and then Richard 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 a black and white way that had impact on the local business. 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 system. So that will sort of continue to operate in a much better way.

But within that business, we have allowed to have more agility and empowerment into these 14 local teams. So these are all very experienced Bunzl who can make very rational business decisions on margins, on availability, on getting supplies in and stuff like that. So not moving back to the old model 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. They're actually quite pleased about all these changes and we are now modifying it for the smaller customers. And let's say, the reactions from the market and from our salespeople are very positive.

So in terms of the double cost, some has been centralized. Some of the cost was not extra cost because 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. And that's why in the second quarter we also took cost out to rectify that kind of situation. So there's no double cost left.

And Will, on gross margins, you can assume that gross margin percentage is slightly up H1 '25 on '24 but that's very much driven by acquisitions. Obviously, we've got Nisbets for a full 6 months in the first half of 2025 compared to about 1 month in 2024. As to the GBP 700 million commitment 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 2 to 2.5, which at that point in time, we anticipated taking until 2027 to play out. Obviously, since that time, we have seen a change in our margins and we've had to -- we've seen obviously a more challenging first half than was expected.

So essentially, we have relevered at least to the lower end of our range during this period. And to the point that -- and the question that Ryan made, we will go back to the range of 2 to 2.5. But essentially or largely, we have relevered within this period, which means that going forward, as I pointed out in this -- in the presentation, we think M&A is going to be the main driver of our cash -- of our free cash generation or the main use of our free cash generation after a dividend.

Our next question comes from Suhasini Varanasi from Goldman Sachs.

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. I think your deferred and contingent consideration on M&A, could you just remind us how much is the expected payout for '26 and '27 on -- from the free cash flow?

Yes. Suhasini, when we said -- when we talked about July, we were actually talking more to not just organic revenue. So more to the point that obviously the second half requires a margin improvement. So the bigger point that we're trying to make in giving you a sense of what July has traded to be is actually that it's in line with our profit and margin expectations as much as 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 payments of the GBP 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. There will be a relatively light amount in 2026, sort of mid-tens of millions. You can see that in the notes of the accounts. We do provide a time line for when these payments will be made. But majority -- the vast majority will come out in '27, '28.

That's very clear. 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.

Yes. Nothing around prebuying. We haven't seen that as a trend. A lot of the work we -- 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 make sure that we pass the right amount at the right time. As a consequence, we haven't really seen any disruption in people buying ahead in any meaningful sense. So it's not that. But I think it's probably better generally for us to have given you a full income statement view that both profit and margin in July are consistent with what we need for the full year. You can assume the same is true for revenue growth as well.

Our next question comes from David Brockton from Deutsche Numis.

I have 3 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 now 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.

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 but could you just elaborate on what precisely you've seen there for those online businesses?

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

Yes. David, yes, I think you can take it that Q2 was a bit better than we had expected. 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 traded pretty well and saw volume growth. To your point on -- on your tariff point, most of the tariff went through in Q2, mid- to late Q2. Therefore, in terms of impact on inflation or deflation that -- it had less of an effect in Q2. There will be more of an effect of that in H2 as long as these tariffs stick, of course.

On your point on volume, yes, look, I think you can assume there has been an improvement in volume between Q2 and Q1. Again, the point around comps is important because we very much need to see that improve in the second half. But I think it's encouraging and the positive signs we're seeing in our North American Distribution business around potential wins in the second half, should they arrive, would certainly help that.

And your question on local sales, good question. So actually 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 6 to 9 months, our staff turn has been normal compared to previous periods, especially in our redistribution business. So that is encouraging. The problem was not so much around losing people. 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, most of all, local speed of execution and decision-making.

And so it's the same salespeople. Actually, for these areas where we lost some people, we have a very successful sales team graduate program with more than sales -- 10 graduates in it. And these people actually have been going into the market over time also. 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 -- if they need a price, they can get it within an hour instead of in 5 days. They get the support from the local management. They can bring in a supplier. They can do stuff with suppliers. So that was more, let's say, the issue.

In terms of Europe online, I think we have some very successful businesses in this area. One of the larger business has been adopting a strategy of implementing a marketplace, which effectively means that outside the areas of where you deliver products 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 has impacted some of the speed of the tools. 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.

Our next question comes from Karl Green from RBC.

I've got 2 questions. Just in terms of trying to assess and track the improvement program. You've indicated that service levels 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. 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&A slowdown. I think, Frank, you did indicate that part of that is Bunzl deciding to pull certain processes. So the question would be, what are you seeing in the books of targets that is giving you that sort of second thoughts or thoughts given you -- making you think twice about pushing forward? I mean, on the basis that Bunzl typically targets fairly resilient businesses, what kind of businesses are seeing the slowdown at the moment? That would be helpful.

Yes. Just on M&A, so yes, you do see it sort of relatively broadly in different sectors, I have to say, certainly in areas like foodservice, you see in the U.S., for instance, that -- and you can see it also some of the results that Sysco and US Foodservice (sic) [ US Foods ] came out with softer numbers on volume. So 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 [indiscernible] business as well. So it's slightly broader. I think it's an uncertain time. So people are a bit more uncertain. Sometimes they wait a bit longer with putting their businesses out for sale and hope for a better time. So that's all relatively normal in terms of what is happening.

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

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 second half but also allowing us to service what have been actually some quite successful own brand launches in Q2, which equally will help us in the second half. So I think we're pretty much there. But it's constant vigilance in this area.

Okay. And so just following up 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?

I would say I feel really good about the changes we are making already and the impact on our people and how effective we are in terms of winning business, launching own brands and stuff like that. I'd say the -- I think for me, the proof on the pudding is really 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 our own brand development. So I expect that to happen somewhere maybe in the second half of 2026, where everything runs more smoothly and that also translates into good growth and winning back business.

[Operator Instructions] Our next question comes from Dylan Jones from KC.

Just a quick follow-up. The statement around expecting some benefits in North America to materialize well into 2026. So can I just clarify the -- 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 2026?

And then just one last question from me. 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 monitored as you move towards this new operating structure?

Yes. That's a good question. Yes. So let's say the one thing that is slightly different in the U.S. 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, catering, theme parks. And here, we are in a two-tier system where we are selling to the redistribution market. And especially the local part of that market is very, very -- you need to be very proactive, fast response because they are operating on behalf of their customers.

So giving you an example. If you are local, let's call it, a small Sysco 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 Christmas articles near the end of the year which they don't sell a lot of, then that question gets to Bunzl because the food distributor can't stock all these products. There's maybe 100,000 products around the market. So the food distributors, they have -- 90% of what they sell is food. So 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 are relying on distributors for to fill that in because, otherwise, they need to have a warehouse that's 5x bigger than they operate on.

So that's a bit different but that also dictates how fast you need to be able to be successful. Now -- and that is what actually we put back into the business and it's largely working because most of the people that were used to work in that old model are used to that responsiveness 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 that, let's say, our stock levels are coming down, our service levels are up, our people are happy.

I'm sitting down -- I'm often in the U.S. 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 on, yes, this is really operating and I want this and I want that, my customer is happy and I'm happy, still where -- we have still improvements to make and we monitor them and we knock them out one by one. So it's very clear to see if something is starting to get better. And that is what I'm seeing. But if you have customers, they also buy certain categories and they're not just shifting that every week when somebody comes in. So there's an element of, let's say, time, let's say, 1 year, 18 months that more of these categories are being reviewed again, certainly by slightly bigger customers as well. And that's the time where we will be there to trying to sort of win back.

So we have some early successes. We also get some early successes in the second half already, which is encouraging. And we are focusing on getting more done in the second half because Bunzl is still seen as the market leader in redistribution. We're still dealing with all these categories. We just lost a bit of share of wallet but we are trying to win back, supported by more home brands also coming in.

And Dylan on that, the comment about expecting benefits from certain actions well into 2026 was something we said 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 a lot of which have happened and taken place in either late Q1 or in Q2. But there are others which are likely to take a longer time -- longer to play out. We're mainly thinking about winning back business we've lost there. It's not a cost point. 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 comment relates to.

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

Yes. Thank you all for joining. I think it has been quite an unusual half year for Bunzl, impacted strongly about some of the things that happened in our U.S. business. Just I'd like to remind people, this business represents 30% of our business. Bunzl has always been a very resilient, predictable business. About 150, 160 portfolio businesses in different markets and regions giving us that resilience. 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 going to take a little bit of time also to win back also. But I feel good about where we're going. And when fixed, I expect to have 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.