Business

Bunzl increases earnings outlook as cost inflation eases

Distribution and outsourcing group Bunzl posted a 4 per cent rise in underlying pre-tax profits to £395.6 million for the six months to June 30
Distribution and outsourcing group Bunzl posted a 4 per cent rise in underlying pre-tax profits to £395.6 million for the six months to June 30

DISTRIBUTION and outsourcing group Bunzl has increased its full-year earnings guidance thanks to easing cost pressures and self-help action to boost profitability.

The group posted a 4 per cent rise in underlying pre-tax profits to £395.6 million for the six months to June 30, although profits were 0.8 per cent lower with currency movements stripped out.

Underlying operating profits lifted 6.5 per cent to £438.3 million, or 2.5 per cent higher on a constant currency basis.

The FTSE 100-listed firm said it now expects annual underlying earnings to be "moderately higher" than in 2022 at constant exchange rates as it also upgraded its profit margin outlook.

Bunzl - which supplies businesses around the world with a variety of products, including coffee cups and food labels to department stores and hospitals - said cost inflation has fallen back, "driven by a meaningful reduction in freight costs and wage growth that was closer to more typical historical levels".

Bunzl Ireland already has a strong presence in Armagh through Bunzl McLaughlin and Bunzl Rafferty, which both specialise in hospitality supplies.

The company also hailed efforts to boost margins through a series of initiatives, including driving higher sales of more profitable own-brand products.

But the pullback in inflation is a "double-edged sword" for the group, according to Hargreaves Lansdown equity analyst Matt Britzman.

He said: "On the one hand, lower input costs have helped margins push higher over the half, but the flip side is a drop in revenue as the pricing on a lot of Bunzl's products can be linked to inflation.

"Add in a drop in Covid-related sales and the underlying business is seeing a bit of weakness creep in; comparable periods are tough though."

Revenues lifted 4.5 per cent to £5.9 billion, or 0.6 per cent higher on a constant currency basis over the first half.

Bunzl said sales and profit margins are also being given a fillip by its flurry of acquisitions, having announced 12 so far in the year to date - including another two unveiled alongside its interim results.

Bunzl said it has acquired a business in Poland - its first in the country - and another one in the Netherlands.

Mr Britzman said: "The announced acquisition in Poland marks the group's first foray into the region, one that's previously been on the radar.

"The protective equipment distributor fits nicely in with Bunzl's model and should give a platform to build on in the region."

The latest deals take the group to 207 acquisitions announced since 2004.