- Firm passing on 'significant' price hikes
- Recovery in base business offsetting lower Covid sales
- Full year operating margin estimate raised
Global distribution group Bunzl (BNZL) delivered a robust first half trading update and predicted its full year operating margin would be ‘only slightly lower’ than last year, which was boosted by Covid-related sales.
Shares in the FTSE 100 firm initially slumped as much as 8% but quickly recovered to trade around 3% lower at £30.27 as investors digested the improved guidance.
PRICING POWER
Revenue for the six months to June rose 16.1% on a headline basis, including gains from the strong dollar, or 12.4% at constant exchange rates to £5.65 billion.
The firm put the increase down to a recovery in volumes in its base business, growth from acquisitions and passing on price rises.
The base business saw ‘very strong’ price growth across North America, Europe, the UK and Ireland, although this was partly offset by a decline in specific Covid-related sales compared with last year, which the company had flagged in previous updates.
Revenue growth was strongest in foodservice, retail and grocery, driven by a recovery in activity and ‘significant’ price inflation, while the safety business in North America saw signs of improvement.
On the back of its first half performance, the company said it expected its operating margin would be higher than historical levels and almost on a par with 2021.
GROWTH COMPOUNDER
Chief executive Frank van Zanten said the group was ‘focused on continuing to execute our long-term compounding growth strategy’, with six acquisitions completed year-to-date and an active pipeline of deals ‘with good balance sheet headroom’.
‘We believe the merits of joining Bunzl have been amplified over the last few years, supporting our long-term strategic commitment to investing in businesses that drive growth and returns for the group’, he added.
This year’s deals include buying an online distributor in Germany, boosting its core business, as well as moves into adjacent sectors such as warehouse storage solutions for its customers.
Analysts at Shore Capital said Bunzl’s first half EBIT (earnings before interest and taxes) figure was ahead of their forecasts, which together with the revised margin guidance means they would upgrade their forecasts.
