Bunzl PLC on Tuesday upped its margin guidance after strong first-half trading for the London-based distribution firm.

Pretax profit in the six months to June 30 grew 7.6% to £296.6 million from £275.7 million.

Bunzl declared an interim dividend of 17.3p, up 6.8% on the 16.2p paid out a year before.

‘The strength of our first half results is testament to...the resilience of our value-added business model. Over the period, our teams have been agile in navigating substantial inflation and supply chain disruption,’ explained Chief Executive Officer Frank van Zanten.

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,’ Bunzl said.

Inflation was ‘somewhat supportive’ to margins, it said, 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.

CEO van Zanten said Bunzl remained focused on continuing its long-term compounding growth strategy, and cited its diverse portfolio as resilient regarding the economic outlook.

Bunzl shares fell 4.6% to 2,972.00 pence each in London on Tuesday morning.

‘Shares in Bunzl are trading lower after its first half earnings report disappointed investors. Although it raised its operating margin outlook, it is still expected to fall in the full year versus 2021,’ explained Victoria Scholar, head of investment of Interactive Investor Ltd.

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