30th Jun 2022 17:26
(Alliance News) - The market has pre-empted Bunzl PLC's inflation-driven strong trading, said broker Davy following Thursday's guidance upgrade.
The company said it expects to deliver "very strong" growth over the six month period to June 30.
Bunzl said revenue in the first half is expected to increase year-on-year by 16% at actual exchange rates and by 12% to 13% at constant exchange rates, with inflation continuing to drive underlying revenue growth and acquisitions also supplementing progress.
The company explained: "Across our business areas inflation remains the key driver of performance. Very strong revenue growth has been maintained in North America over the period and negotiations with our largest customer are constructive and ongoing. Continental Europe similarly maintained strong momentum, whilst the UK & Ireland's operating margin continues to see year-on-year improvement alongside very strong base business recovery. Rest of the World's revenue growth has been moderate, with very strong growth in Asia Pacific partially offset by the expected decline in Covid-19 related sales in Latin America."
The adjusted operating margin for the first half is expected to be slightly higher than historical annual levels, it noted.
Bunzl upgraded its guidance for the year on the basis of the strong revenue growth to date and announced acquisitions, though no actual figures were provided.
At constant exchange rates, Bunzl now expects "very good" revenue growth in 2022, driven by good organic revenue growth and the positive contribution of acquisitions. Bunzl had previously expected "moderate" annual revenue progress.
"Growth of the base business is expected to be only partially offset by the further normalisation of sales of Covid-19 related products, albeit these are expected to remain ahead of 2019 levels," Bunzl added.
Bunzl shares closed up 1.8% at 2,719.00 pence in London on Thursday, significantly outperforming the wider FTSE 100 which fell 2.0%.
Though the stock is down 5.8% since the start of 2022, it hit an all-time high of 3,167.26p in April of this year.
Broker Davy said the market has played the stock as an "inflation proxy".
"Inflation appears to have been a significant portion of the base growth (we believe it is around 70%) and we would question how long these supernormal levels can last – 2023E may see an easing of inflation coupled with tougher comps and it will be interesting to see how much acquisitions can add over the next few months," said Davy.
By Eric Cunha; [email protected] and Lucy Heming; [email protected]
Copyright 2022 Alliance News Limited. All Rights Reserved.
Related Shares:
Bunzl