Bunzl PLC on Tuesday said 2024 had been another year of ‘significant progress’ but cautioned that continuing price deflation will have a ‘slight’ impact on annual profitability.

In response, shares in the London-based distribution and outsourcing company fell 4.6% to 3,396.00 pence each in London on Tuesday morning. It was the worst performing stock in the FTSE 100 index, which was down 0.6%.

In a trading statement, Bunzl said it expects revenue in 2024 to be around 3% higher than in 2023, at constant exchange rates, and between 0% and 1% lower at actual exchange rates.

Growth at constant exchange rates is expected to be driven by acquisitions, with a small decline in underlying revenue over the year.

Within underlying revenue, volume growth in the third quarter is expected to continue in the fourth quarter, although deflation is likely to be more ‘persistent’ than previously anticipated.

This is expected to have a slight impact on adjusted operating profit in 2024, driven by Continental Europe.

Nonetheless, adjusted operating profit in 2024 will represent a strong increase in comparison with 2023 at constant exchange rates.

Expected operating margin for 2024 is ‘strong’ and continues to be moderately above the level reported for 2023, Bunzl said.

In 2023, Bunzl reported revenue of £11.78 billion, adjusted operating profit of £944.2 million, and an operating margin of 8.0%.

Looking ahead, Bunzl expects robust revenue growth in 2025, at constant exchange rates, driven by already announced acquisitions and slight underlying revenue growth.

Operating margin is expected to be maintained in-line with 2024 and to remain substantially higher compared to pre-pandemic levels, driven by higher margin acquisitions, as well as a good underlying margin increase.

Chief Executive Frank van Zanten said: ‘2024 will be another year of significant progress for Bunzl.’

He pointed out Bunzl has committed a record £850 million in 2024 to 13 announced acquisitions and said the pipeline remains ‘active’.

Plans for a £200 million share buyback in 2025 were also confirmed on Tuesday.

Analysts at RBC Capital Markets said the comments on deflation had taken the shine off a solid 2025 outlook.

‘We think this may pose a [low-single-digit] headwind to consensus 2024 [earnings before interest and tax], given that Continental Europe represents [around] 20% of group revenues.’

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