ii view: Bunzl bets on improvement initiatives

First-half trading update to 30 June

• Expects currency adjusted revenues for the period to be up 4% year-over-year
• Expects revenues stripped of acquisitions to prove flat

Guidance:

• Continues to expect a full-year 2025 operating profit margin moderately below 8%, down from 2024’s 8.3%

Chief executive Frank van Zanten said:

"Alongside a macroeconomic backdrop that remains uncertain, the Group is trading in-line with our expectations. Actions are underway to improve performance in the Group, particularly in our largest business in North America and in Continental Europe, and we anticipate improvement in the second half of the year.

“The Group's compounding growth strategy and resilient business model underpin Bunzl's long-term track record of delivery and the Group continues to be well placed to navigate periods of macroeconomic uncertainty given our focus on essential products, the depth of our customer and supplier relationships and our sector and geographic diversification."

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ii round-up:

Bunzl (LSE:BNZL) is a global distributor of non-food consumables products such as paper towelling, disposable cutlery, cleaning products, and personal protective equipment. 

Employing round 27,000 people, the FTSE 100 company operates across 32 countries.  

For a round-up of this latest trading update announced on 24 June, please click here.

ii view:

Began in 1854 by Moritz Bunzl as a Slovakian haberdashery, the company today has over 15,000 global supplier relationships. Products sold and delivered to customers such as Walmart, Dominoes Pizza and the NHS include both its own and other companies branded goods. The company’s six core markets range from grocery, foodservice and safety, to retail, cleaning & hygiene, and health. 

Geographically, North America generated its biggest slug of sales in 2024 at 56%. That was followed by Europe at 20%, the UK and Ireland 14%, and the Rest of the World the balance of 10%.  

For investors, a combination of trade tariff uncertainties and cuts to US government jobs may now be dampening US consumer appetite to spend, including eating out at restaurants potentially supplied by Bunzl. Increased NI staff taxes for the UK business now raise costs. Bolt-on acquisitions to boost sales growth are not guaranteed, while a ratio of net debt-to-adjusted profit (EBITDA) at the end of 2024 of 2.1 times, versus 1.6 times in late 2023, has underpinned management’s caution in halting a £200 million share buyback programme. 

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More favourably, management initiatives to improve performance are now being pushed, including a focus on higher margin own-branded goods. Bolt-on acquisitions continue to be made with the latest concluded in Brazil. Bunzl’s position as global leader in its market with no competitors of a similar size is not to be overlooked, while more than 30 years of consecutive dividend increases leave the shares on a forecast dividend yield of around 3.3%. 

In all, and while a further a deterioration in sales and profits cannot be ruled out, Bunzl does boast a track record for compounding growth over the longer term.

Positives: 

• Diversified customer type and geographical location
• Continues to seek growth enhancing acquisitions

Negatives:

• Uncertain economic outlook
• Subject to currency volatility

The average rating of stock market analysts:

Hold