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Bunzl shares rise on profit upgrade

Bunzl, a world leader in distribution services, said underlying operating profit is expected to exceed prior estimates in the full year 2023.

The company had earlier indicated that its profit would experience a “moderate increase” compared to 2022, when taking into account constant exchange rates.

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Bunzl shares were up 2.20% at the time of writing on Thursday.

Bunzl’s update further explains that, when taking into account the divestiture of the UK healthcare business, the overall Group revenue in 2023 is expected to show a decrease of 1 to 2% compared to 2022, considering constant exchange rates and currency fluctuations having minimal influence throughout the year.

“Bunzl delivers an early Christmas present for investors with a small upgrade to margin guidance. Revenue weakness was expected as COVID-related sales continued to normalise and tailwinds from higher inflation faded away,” said Matt Britzman, equity analyst at Hargreaves Lansdown.

The end-of-year update further explains that the company’s revenue in 2023 is projected to be broadly in line with 2022, considering constant exchange rates and excluding the impact of the divestiture of the UK healthcare business.

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Within this, the anticipated growth in revenue from acquisitions is expected to balance out the anticipated decline in underlying revenue.

Bunzl’s CEO, Frank van Zanten, said on Thursday, “We welcome three new complementary businesses to the group today, taking the total acquisitions announced this year to 17. Over the last four years, we have committed a cumulative circa £1.7bn to acquisitions, reflecting a step-up in our spend and with our pipeline remaining active and supported by our strong balance sheet.”

Looking into the future, Matt Britzman said that “higher-margin acquisitions, along with some organic improvements, are doing their job to prop up the bottom line. As we move into 2024, comparable periods should ease on the top line, reflected in guidance for some revenue growth next year, which is likely ahead of most analysts’ forecasts”.

“Bunzl has a resilient product range and a highly cash-generative model. The key thing to watch is how organic growth plays out from here. Prolonged weakness in this area puts added pressure on acquisitions to do the hard  work”, Britzman added.

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