14th Dec 2023 16:45
(Alliance News) - Bunzl PLC on Thursday said it was set to shake off tough market conditions and deliver profit growth for the current year, though Hargreaves Lansdown analysts say investors should be keeping an eye on how organic growth develops.
Bunzl, the London-based distribution firm, said following its strong performance in recent years, it "expects to deliver another set of good annual results".
Adjusted operating profit for 2023 should be "slightly ahead" of previous guidance, delivering "moderate growth" with a slightly higher operating margin.
Revenue should be "broadly in line with 2022, at constant exchange rates and excluding the impact of the disposal of our UK healthcare business", Bunzl said.
Including this disposal, Bunzl expects total revenue to be 1% to 2% lower year-on-year at constant exchange rates. It earned GBP12.04 billion in revenue during 2022, and GBP885.9 million in adjusted operating profit.
Bunzl noted that its several acquisitions during 2023 helped fuel revenue growth, although it said an expected underlying revenue decline will probably offset this. The decline reflects lower sales related to Covid-19, wider post-pandemic normalisation patterns, and reduced inflation benefit.
"Bunzl delivers an early Christmas present for investors with a small upgrade to margin guidance. Revenue weakness was expected, as Covid-related sales continue to normalise, and tailwinds from higher inflation fade away. Higher-margin acquisitions, along with some organic improvements, are doing their job to prop up the bottom line," considered Matt Britzman, equity analyst at Hargreaves Lansdown.
Bunzl completed five acquisitions in 2023, including its purchases of Melbourne Cleaning Supplies and of Flexpost in November, and of Canadian distributor Miracle Sanitation Supply in December.
Looking further ahead, Bunzel expects planned acquisitions and "slightly positive" organic growth to drive "some revenue growth" in constant currency during 2024. This is "despite uncertainties relating to the wider economic and geopolitical landscape".
HL's Britzman said: "As we move into 2024 comparable periods should ease on the top line, reflected in guidance for some revenue growth next year which is likely ahead of most analysts' forecasts.
"Bunzl has a resilient product range and a highly cash-generative model. The key thing to watch is how organic growth plays out from here. Prolonged weakness in this area puts added pressure on acquisitions to do the hard work."
Shares in Bunzl closed up 0.3% at 3,130.00 pence each in London on Thursday.
By Elizabeth Winter, Alliance News deputy news editor
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