Bunzl PLC on Tuesday said it will commit significant funding towards acquisitions and shareholder returns as the company reports weaker performance in the first half.
The London-based distribution and services provider said pretax profit fell 12% to £279.4 million in the first half that ended June 30 from £317.1 million the previous year.
Revenue declined 3.3% to £5.71 billion from £5.91 billion as a result of deflation which impacted the North American, Continental Europe, and UK & Ireland regions.
However, underlying revenue growth stood at 2.2% for the Rest of the World, driven by volume growth in Latin America and inflation benefits in Asia Pacific.
Bunzl raised its interim dividend by 10% to 20.1 pence per share from 18.2p and announced an initial £250 million share buyback programme which will start with immediate effect.
The company further committed to allocating £700 million towards acquisitions, and capital returns if required, in each of the three years ending December 31 2027.
Chief Executive Officer Frank van Zanten said: ‘Despite a material increase in the amount of capital we have allocated towards self-funding value-accretive acquisitions, our consistently strong cash generation means that leverage has remained below our target range for some time.
‘Our acquisition pipeline remains active and our runway of opportunity is substantial. Today the group is in an excellent position to pursue our pipeline of value-accretive acquisitions within the very large and fragmented global markets that we operate in, and also return excess cash to shareholders.
Thus far in 2024, Bunzl has committed £650 million towards seven acquisitions including the Australian cleaning equipment distributor PowerVac most recently in July.
Bunzl upgraded full-year guidance and now expects its operating margin to be ’moderately above‘ 8.0% reported in 2023, up from June’s revised guidance which forecasted an outcome ’slightly above‘.
As previously announced, adjusted operating profit is also expected to show a strong increase from £944.2 million in 2023 and ’robust revenue growth‘ is anticipated.
Bunzl shares were up 9.0% at 3,504.00 pence each in London on Tuesday morning.
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