Bunzl hails 'resilient' performance as interim profit rises
Distribution and outsourcing group Bunzl posted a rise in interim profit and revenue on Tuesday as it backed its expectations for the full year and said it was in "active discussions" with several acquisition targets.
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In the six months to the end of June, adjusted pre-tax profit was up 2.7% at £264.2m, or 0.8% higher at constant exchange rates, while revenue pushed up 4.3% to £4.5bn, or 1.2% higher at constant exchange rates. Bunzl said revenue was boosted by acquisitions but this was partly offset by the impact of disposals.
Bunzl said currency translation had a positive impact on its reported results, boosting revenue, profits and earnings by between 2% and 3%. This was mostly due to the weakening of the pound against certain currencies, particularly the US dollar and the Canadian dollar, partly offset by the strengthening of sterling against the euro, Australian dollar and Brazilian real.
The interim dividend was boosted by 2% to 15.5p a share.
Revenue in North America ticked up 0.7% at constant exchange to £2.6bn, while Continental Europe saw 3.7% growth to £900.6m, lifted by three acquisitions last year and the part-year contribution of Coolpack acquired back in April. The rest of the world was the standout performer in terms of revenue, however, with an 8.2% increase to £385m.The UK & Ireland saw revenue drop 3.7% to £602.5m, mainly as a result of the disposal of the marketing services business in June last year.
Chief executive Frank van Zanten said: "Against the background of slowing macroeconomic and market conditions across the countries and sectors in which we operate, Bunzl has produced a resilient operating performance with high cash conversion and an increased dividend.
"Looking forward, the group's expectations for 2019 remain unchanged. Despite continuing economic uncertainties, the board believes that the combination of our strong competitive position, diversified and resilient businesses and ability to consolidate our fragmented markets will lead to further progress. We have a strong balance sheet and are in active discussions with a number of acquisition targets which we anticipate will result in additional deals during the remainder of the year."
At 0920 BST, the shares were down 1.9% to 1,995p.
Russ Mould, investment director at AJ Bell, said: "Perhaps the ultimate sign of Bunzl being very cautious is the pace of dividend growth which has fallen to a mere 2%. The previous five years saw 9% average dividend growth.
"Dividends are a good way to gauge how management are thinking; high payment levels would suggest confidence in future trading and financial strength; lower payment levels would suggest caution about near-term trading.
"Bunzl has a good track record of growing its dividend every year and that has become one of its key sales pitches to investors. Management would do everything they can to protect that track record. A 2% dividend increase from Bunzl is therefore a token payment to sustain its dividend growth status, but any other firm also nervous about future trading may not have raised the shareholder payment at all."