Bunzl has been contending with two key factors driving underlying performance; the pandemic and price inflation. The distribution company enjoyed a jump in activity during the pandemic, which has now diminished and price inflation is flatlining.
These influences were demonstrated in Bunzl’s revenue growing just 0.6% constantly in the six months ending 30th June.
Group adjusted operating profit rose 6.4% to £438.3m while margins expanded slightly to 7.4%.
“Bunzl generates most of its revenue and profit outside the UK, with the US a key region, so it’s not the economic conditions at home that turn the dial. Inflation easing in the US is a double-edged sword. On the one hand, lower input costs have helped margins push higher over the half, but the flip side is a drop in revenue as the pricing on a lot of Bunzl’s products can be linked to inflation,” said Matt Britzman, equity analyst at Hargreaves Lansdown.
“Add in a drop in COVID-related sales, and the underlying business is seeing a bit of weakness creep in, comparable periods are tough though. Aside from lower costs, margins also got a bump from consumers shifting to own-brand products in response to ongoing pressures on income.
Bunzl continues to grow through acquisitions with the company announcing their first investment in Poland today.
“Acquisitions remain key to the Bunzl story, with £350m committed so far this year,” Brizman said.
“Strong cash generation underpins self-funded growth and the 12 acquisitions announced so far this year highlight the intent. The announced acquisition in Poland marks the group’s first foray into the region, one that’s previously been on the radar. The protective equipment distributor fits nicely in with Bunzl’s model and should give a platform to build on in the region.”
Bunzl shares were 3.5% higher at the time of writing.