15th Jun 2020 08:14
(Alliance News) - Distribution and services firm Bunzl PLC said it expects to report higher revenue for the first half of its financial year despite the ongoing Covid-19 pandemic.
The stock was up 6.6% early Monday following the announcement at 2,009.00 pence.
The London-headquartered company is forecasting a 6% rise in revenue at actual and constant exchange rates for the six months ending June 30.
Adjusting for the different number of trading days year-on-year, revenue is set to increase by around 5% at constant exchange rates due to a 2% rise in underlying revenue and a 3% contribution from recent acquisitions.
As a consequence of an altered product mix sold in the period, including an increase in the proportion of imported own-brand product, the overall interim operating margin is set "to be modestly higher" versus the prior year, Bunzl said.
The breadth of sectors in which Bunzil operates, as well as "the wide range of products supplied", are expected to help trading performance. This is because the drop in the lower-margin retail and foodservice sectors is likely to be more than offset by the strength of "the grocery and generally higher margin safety, cleaning & hygiene and healthcare sectors" given the rise in sales volumes for "Covid-19-related products", it said.
This rising demand for Covid-19-related products is set to drive "particularly strong" revenue growth in Bunzl's continental Europe and Rest of the World regions, while revenue increases in North America and UK & Ireland are forecast to be more slight.
Given this "better than expected trading performance", Bunzl plans to bring forward settlement of deferred tax where it can and "repay employee-related government support packages".
At present, Bunzil cannot assess the pandemic's impact on annual performance given a "lack of visibility of how the virus might affect trading conditions during the second half of the year".
As such, Bunzl is cautious on its outlook especially as the volume of virus-related production from the first half is unlikely to repeat and many of its customers now have "significant stocks of products for the remainder of the year".
While retail and foodservice sectors are likely to continue to be hurt by lower demand, the healthcare, cleaning & hygiene, and grocery supply areas of the business should "deliver a resilient performance", the company said. The safety sector is set to be a mixed bag in terms of trading performance going forward.
"There has been no significant change in Bunzl's financial position during the first half, and the company continues to have substantial funding headroom available with strong cashflows and a robust balance sheet," it said.
By Anna Farley; [email protected]
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