London-based distribution firm Bunzl on Tuesday upped its margin guidance after strong first-half trading.
Revenue for the first half of 2022 rose 16% to £5.65 billion from £4.87 billion a year before. Revenue was driven by product cost inflation and continued volume recovery in the base business, and growth from acquisitions.
‘The base business saw very strong revenue growth across North America, Continental Europe and UK & Ireland, driven by strong product cost inflation. This was complemented by volume recovery in Continental Europe and UK & Ireland, due to the reduced level of Covid-19 related restrictions compared to the prior year,’ it said.
Pretax profit improved 7.6% to £296.6 million from £275.7 million.
Bunzl said inflation was ‘somewhat supportive’ to margins, though the reduction of Covid-19 sales meant they still narrowed to 7.3% from 7.5%. Still, Bunzl now expects its full-year operating margin to be higher than historical levels and only slightly below 2021.
‘At constant exchange rates, the group continues to expect very good revenue growth in 2022, driven by good organic revenue growth and the positive contribution of acquisitions announced in the last 12 months. Growth of the base business is expected to be only partially offset by the further normalisation of sales of Covid-19 related products, albeit these are expected to remain ahead of 2019 levels,’ it added.
Bunzl declared an interim dividend of 17.3p, up 6.8% on the 16.2p paid out a year before.
Shore Capital said investors are likely to focus on the impact of inflation, energy costs and logistics on Bunzl’s margins. However, overall, the broker saw the announcement as an ‘excellent set of results...on first look through’.
Bunzl shares were down 3.6% early Tuesday.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.5% at 7,463.21
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Hang Seng: down 0.5% at 19,915.79
Nikkei 225: closed up 1.1% at 28,195.58
S&P/ASX 200: closed up 0.5% at 6,998.30
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DJIA: closed down 184.41 points, or 0.6%, at 32,098.99
S&P 500: closed down 0.7% at 4,030.61
Nasdaq Composite: closed down 1.0% at 12,017.67
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EUR: flat at $0.9990 ($0.9997)
GBP: down at $1.1709 ($1.1764)
USD: up at JP¥138.61 (JP¥137.31)
Gold: down at $1,733.38 per ounce ($1,736.54)
Oil (Brent): up at $104.43 a barrel ($99.59)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Tuesday’s key economic events still to come
1100 CEST EU economic sentiment indicator
1400 CEST Germany provisional consumer price index
0800 EDT US Fed Richmond President Thomas Barkin speaks
0855 EDT US Redbook retail sales index
0900 EDT US house price index
1000 EDT US consumer confidence index
1000 EDT US job openings and labour turnover survey
1100 EDT US Fed New York President John Williams participates in a WSJ Live Q&A event
1630 EDT US API weekly statistical bulletin
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Millions of people in areas surrounding China’s capital were ordered into lockdown Tuesday, with authorities doubling down on efforts to contain Covid-19 ahead of a key ruling Communist Party meeting this year. Nearly four million people in Hebei province, which surrounds Beijing, were ordered to stay home until the end of the week as officials rush to curb a small virus flare-up. And more than 13 million in the neighbouring port city of Tianjin must undergo mass testing, after 51 mostly mild cases were reported. China is the only major global economy sticking to a zero-Covid policy, and lockdowns, travel restrictions and mass testing have disrupted businesses and cooled growth. Beijing has doubled down on the policy ahead of the Communist Party’s 20th National Congress, expected to take place within the next three months.
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Chinese police have arrested more than 200 suspects linked to one of the country’s biggest-ever banking scandals, which triggered rare mass protests. Four banks in central China’s Henan province suspended cash withdrawals in April as regulators cracked down on mismanagement, freezing the funds of hundreds of thousands of customers and sparking protests that at times ended in violence. Police said Monday they had now arrested 234 people in connection with the scandal and that ‘significant progress’ was being made in recovering stolen funds. ‘A criminal gang...illegally controlled four village and town banks...and was suspected of committing a series of serious crimes,’ police in the city of Xuchang said in a statement on Monday.
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Pubs and brewers across the UK are at risk of closure within months amid price hikes upwards of 300%, industry bosses have warned. Bosses of six of the UK’s biggest pub and brewing companies have signed an open letter to the government urging it to act in order to avoid ‘real and serious irreversible’ damage to the sector. Greene King, JW Lees, Carlsberg Marston’s, Admiral Taverns, Drake & Morgan and St Austell Brewery all sounded the alarm on Tuesday. On Friday, regulator Ofgem confirmed that bills for an average UK household would surge by 80% in October when the new price cap comes into force.
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BROKER RATING CHANGES
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Barclays raises BAT price target to 4,500 (4,400) pence - ’overweight’
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Barclays raises Coca-Cola HBC price target to 2,600 (2,000) pence - ’overweight’
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Barclays cuts Asos price target to 920 (1,075) pence - ’equal weight’
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Jefferies cuts Kingspan group to ’hold’ (buy) - price target 63.60 (72.40) EUR
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COMPANIES - FTSE 100
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Dechra Pharmaceuticals said it has bought California-based veterinary pharmaceutical manufacturer Med-Pharmex for $260.0 million. Med-Pharmex has been a ‘long-term acquisition target’, it said, and will bolster Dechra’s operations in the US. ‘The US market is highly consolidated, therefore this is a unique opportunity to add several new products to our portfolio, enter the US FAP market and improve the manufacturing footprint for our North American business,’ said Dechra Chief Executive Ian Page.
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COMPANIES - SMALL CAP
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Old Mutual said profit fell in the first half of 2022, as a result of an increasingly volatile global economy, which hit gross flows. The Anglo-South African financial services firm’s pretax profit dropped by 28% to R 5.12 billion for six months that ended June 30 from R 7.09 billion a year prior. Net earned premiums were almost flat at R 35.87 billion from R 35.61 billion. Funds under management were up marginally by 1.1% to R 1.18 trillion from R 1.17 trillion. In the first half, gross flows decreased by 14% to R 83.39 billion from R 96.99 billion, while value of new business declined by 4% to R 708 million from R 740 million. Old Mutual kept its interim dividend unchanged at 25 rand cents. ‘We were able to maintain a dividend in line with our prior interim dividend due to our robust operational performance and our strong capital and liquidity position,’ it said.
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Joules said it continues in ‘positive’ discussions with Next over a possible investment, despite Sky News over the weekend reporting that talks had stalled. Sky News said it has learnt the two companies are not close to agreeing the terms of an investment from Next, and the FTSE 100-listed retailer had not received enough financial information to allow it to make a formal offer to the Joules board. There were also doubts that Next would want to proceed with a deal at 33p per share or more given Joules shares closed at 25.5p on Friday. The stock has fallen 82% since the start of 2022. Earlier in August, the two confirmed they were in talks over a potential equity investment. The move, if it goes ahead, will see Next inject about £15 million into Joules, the AIM-listed company said at the time, noting the price will be ‘at no less than Joules’ current market price’, which was 33p on Friday, August 5, the last trading day before the announcement. Joules on Monday said: ‘There can be no certainty that these discussions will lead to any agreement, and further announcements in this regard will be made if and when appropriate.’
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Dublin-headquartered healthcare services business Uniphar reported interim revenue growth. Revenue for the six months to June 30 rose 2.8% to €991.8 million from €964.9 million. Pretax profit edged down to €20.3 million from €20.7 million, however, as exceptional costs rose to €5.8 million from €3.1 million. ‘Uniphar delivered a strong performance during the first six months of 2022 leveraging its scalable platforms to help mitigate the impact of inflationary pressures and global economic uncertainty,’ it said. Cost inflation remains a concern and will be a key focus through this year and the next, it said.
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Journalists at newspaper group Reach may strike on Wednesday after negotiations ended without agreement. Members of the National Union of Journalists had been engaged in talks with Reach, which includes mastheads the Daily Mirror, Daily Express and Manchester Evening News. A Reach spokesperson said in a statement: ‘Over the weekend we have been in discussions with the NUJ in hope of avoiding industrial action, but unfortunately these talks have ended without agreement. We were able to meet the majority of requirements put forward by the NUJ and proposed an accelerated career development framework that would have set out clearer salary progression for journalists, so we are disappointed that our offer was rejected.’
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Tuesday’s shareholder meetings
Afentra PLC - GM re acquisition of Block 3/05 and Block 23 interests
Harvest Minerals Ltd - AGM
iomart Group PLC - AGM
JPMorgan Global Growth & Income PLC - GM re combination of assets with Scottish Investment Trust PLC
Sivota PLC - AGM
Stanley Gibbons Group PLC - EGM re delisting from AIM
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