29th Aug 2023 10:42
(Alliance News) - Bunzl PLC was one of the top performers in the FTSE 100 on Tuesday morning in London, as investors cheered moderately higher annual guidance and two new acquisitions from the firm.
"Sometimes boring can be beautiful as far as investors are concerned," said Russ Mould, investment director at AJ Bell.
Shares in Bunzl were up 3.6% at 2,822.00 pence on Tuesday morning in London. In the year-to-date, the stock is up 0.9%.
The London-based distribution services company reported that revenue increased 4.5% to GBP5.91 billion in the first half of 2023, from GBP5.65 billion the year prior.
Pretax profit grew 6.9% to GBP317.1 million, from GBP296.6 million a year ago. The firm noted that the sale of its UK healthcare business in December last year negatively impacted profit by 1.8%.
Chief Executive Frank van Zanten said he was "pleased" with the company's first half performance, noting "good" adjusted operating profit growth and an operating margin "significantly" ahead of that achieved prior to the comparable period of 2019.
Given the positive performance in the year-to-date, Bunzl upgraded its 2023 adjusted operating profit guidance.
"We now expect adjusted operating profit to be moderately higher than in 2022 at constant exchange rates, with operating margin remaining strong and moderately higher than that achieved in the prior year. At constant exchange rates we expect group revenue in 2023 to be slightly higher than in 2022, driven by announced acquisitions, partially offset by a slight organic decline, following strong organic growth in recent years, and a small impact from the UK healthcare disposal," the company said.
In 2022, Bunzl reported adjusted operating profit of GBP885.9 million and revenue of GBP12.04 billion. Its operating margin was 7.4%.
In a separate announcement, the firm said it has acquired businesses in Poland and the Netherlands.
Bunzl said it made its first acquisition in Poland, agreeing to purchase personal protective equipment distributor Safety First.
Meanwhile, in the Netherlands Bunzl acquired EcoTools.nl, a tool accessories and industrial consumables online distributor.
Robin Speakman, an analyst at Shore Capital, said, given the "substantial firepower" in Bunzl's balance sheet, he expects the firm's acquisition pipeline to continue to convert through the remainder of the second half of 2023 into 2024.
"Bunzl offers strong value and investment credentials in our view, in an environment which remains positive overall for underlying organic and acquisitive growth. Fundamentals remain strong backed by excellent cash flow credentials and a strong balance sheet with growing firepower for shareholder value creation," Speakman said.
"As always, further acquisitions can be expected to drive upgrades as the year progresses. Bunzl remains a quality cash compounding play, in our view," the Shore Capital analyst concluded.
By Heather Rydings, Alliance News senior economics reporter
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