16th Apr 2025 09:03
(Alliance News) - Shares in Bunzl PLC on Wednesday plunged after it lowered guidance and paused its share buyback amid weaker than expected trading.
The London-based distribution and outsourcing company said revenue grew 2.6% at constant currency exchange rates in the first quarter, against a more "challenging" economic backdrop, with underlying revenue, declining by 0.9%. At actual exchange rates, group revenue increased by 0.8%.
RBC Capital Markets said this is below its forecasts for 5.7% revenue growth at constant currency and a flat underlying performance.
Adjusted operating profit was down significantly year-on-year in the first quarter, reflecting an operating margin decline driven by performance in North America and Continental Europe, Bunzl said.
As a result, Bunzl said now expects moderate revenue growth in 2025, at constant exchange rates, driven by acquisitions and broadly flat underlying revenue.
Group operating margin for the year is expected to be moderately below 8.0%, compared to 8.3% in 2024. Operating margin in the first half of the year is expected to be around 7.0%.
Bunzl had previously forecast "robust" revenue growth in 2025, at constant exchange rates, and an operating margin in line with 2024.
In 2024, Bunzl reported revenue of GBP11.78 billion and adjusted operating profit of GBP976.1 million.
In response, shares in Bunzl dropped 24% to 2,354.00 pence each in London on Wednesday morning, hitting an intraday low of 2,252.00p. It has a market value of GBP7.69 billion.
Chief Executive Frank van Zanten said: "I am disappointed with our performance in the first quarter in this challenging trading environment. We are taking decisive action to improve performance in the group, particularly with regards to execution in our largest business in North America."
The company said it had seen some revenue softness across its North American businesses, in a more uncertain macro environment, resulting in operating margin pressure across the business.
This has required substantial investment and change in the sales and operating model, "which has been more challenging to execute than expected."
Continued deflation has in the quarter has "compounded" these challenges, Bunzl said.
This has resulted in slower-than-anticipated volume improvement and own-brand growth and higher operating costs, which together have driven a significant decline in adjusted operating profit.
Bunzl said it has taken a "series of decisive actions" to improve performance which will deliver a "stronger and more sustainable platform for long-term profitable growth" in North America.
In Europe, operating margin continued to decline in the first quarter but Bunzl expects margin management and cost initiatives to deliver improvement towards the end of the second half of the financial year.
In the UK & Ireland, underlying revenue growth was lower than expected, driven by deflation, with a decline in operating margin reflective of the mix effect of Nisbets in the quarter.
More positively, the Rest of the World unit saw strong underlying revenue growth continues, driven by Latin America.
Given the "significant" macroeconomic uncertainty, Bunzl said it believes it is prudent to be around the lower end of its target leverage range of 2.0 times to 2.5 times adjusted net debt to earnings before interest tax, depreciation and amortisation.
As a result, it has paused its buyback programme for the remainder of 2025, having purchased around GBP115 million of shares in the year to date. In December, Bunzl announced a GBP200 million share buyback.
By Jeremy Cutler, Alliance News reporter
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