Opportunities remain visible for Bunzl to leverage its growth, analysts at Shore Capital said on Wednesday.

Analysts at the investment group said volumes remain stable across the company, with inflation moderating and improved environmental credentials continuing to underpin positive margin development. It expects this to counter continued pandemic related margin decline in 2023.

On December 21, the London-based distribution services company updated positively on trading for 2022, expecting revenue to grow 17% year-on-year.

Bunzl said the expected revenue rise is due to ‘inflation driving underlying revenue growth and the impact of acquisitions further supplementing growth’.

For 2021, Bunzl recorded total revenue of £10.29 billion, so a 17% increase would raise that above £12 billion. Bunzl said the 2022 revenue increase would be 10% at constant currency.

Bunzl also said its adjusted operating margin for 2022 is expected to be slightly ahead of prior guidance, and will be in line with 2021, when it was 7.3%, down from 7.6% in 2020.

Looking ahead to 2023, Bunzl PLC expects revenue to grow slightly, with adjusted operating profit to be ‘resilient’. Adjusted earnings per share are expected to be ‘moderately’ lower from 2022, however.

Shares in Bunzl were were up 1.5% at 2,839.00 pence each on Wednesday afternoon in London. Shore Capital recommended a ‘buy’ rating for the firm.

‘We expect free cash generation once again of over £500 million in 2023 and on top of the strong balance sheet this implies to us significantly greater firepower that £1 billion for acquisitions,’ Shore Capital commented.

‘Bunzl once again offers strong value and investment credentials in our view, post share price weakness since mid-December. Fundamentals remain strong and backed by cash flow and an opportunistic health balance sheet with growing firepower for shareholder value creation,’ it continued, calling the firm a ‘quality cash compounding play.’

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