Bunzl upgrades full-year profit guidance

The FTSE 100 company said it expected robust revenue growth for 2024, buoyed by acquisitions completed earlier in the year, despite a slight decline in underlying revenue.

For the first half, Bunzl anticipated a year-on-year revenue decrease of 3% to 4% at actual exchange rates, and a 0% to 1% decline at constant exchange rates.

Underlying revenue, which accounts for organic growth adjusted for trading days, was expected to fall by approximately 5%.

The decline was put down to volume reductions and deflation in the US market.

However, the group projects a strong improvement in operating margins compared to the first half of 2023, leading to substantial adjusted operating profit growth at constant exchange rates.

In North America, the expected revenue decline in the first half is attributed to reduced volumes in the US foodservice redistribution business and the impact of transitioning customer-specific inventory in the US retail sector, alongside deflationary pressures.

Despite the challenges, second-quarter revenue trends in North America were anticipated to improve over the first quarter, with recovering volumes.

Continental Europe and the UK and Ireland were forecast to see a moderate decline in underlying revenue, while the rest of the world was expected to experience some growth.

Notably, North America was set to achieve good margin growth, and the UK and Ireland, along with the rest of the world, were poised for very strong margin growth, driven by acquisitions and effective margin management.

Bunzl also noted its recent strategic acquisitions, noting that in April, it signed an agreement to acquire RCL Implantes, a Brazilian distributor of surgical and medical devices, which generated revenue of BRL 112 million (£18m) in 2023.

The acquisition, pending final clearance, was set to enhance Bunzl's presence in the Brazilian market.

In June, Bunzl completed the acquisition of Clean Spot, a Canadian distributor of cleaning and hygiene products, which recorded revenue of CAD 7m (£4m) in 2023.

“Our agile and entrepreneurial teams continue to deliver robust profit growth,” said chief executive officer Frank van Zanten.

“I am delighted with the ongoing successful margin management, including increasing penetration of own brands, demonstrated across the group, allowing us to upgrade our full year profit outlook today.”

Van Zanten said he was also pleased to welcome two more businesses to Bunzl, taking its total committed spend on acquisitions to around £600m so far this year.

“After an excellent start to the year for acquisitions, we maintain a strong balance sheet, providing us with significant optionality to continue to self-fund value-accretive acquisitions and our pipeline remains active.”

At 0845 BST, shares in Bunzl were up 0.59% at 2,056p.

Reporting by Josh White for Sharecast.com.