Bunzl: FTSE 100 giant hit by Rachel Reeves’ tax grab
Profit at distribution titan Bunzl took a hit in the first six months of 2025 as challenging economic conditions weighed on the firm’s books.
The FTSE 100 giant’s adjusted operating profit came in at £404.5m for the half, an 11.2 per cent drop from £455.5m for the same period the year prior.
Despite this shares in Bunzl were up nearly five per cent as markets opened on Tuesday.
Revenue at the group’s UK and Ireland business increased 31.5 per cent to £904.2m on the back of the group’s £339m acquisition of Nisbets. But the takeover also reduced the region’s profit margin to 6.6 per cent from 7.6 per cent.
The group also said Chancellor Rachel Reeves’ budget tax raid had added to its challenges across the UK.
“The sales environment has been challenging due to increases in employers’ National Insurance rates, which took effect from April and have negatively impacted demand in some of our key sectors,” the group said.
But the business said it had “mitigated” the cost impact through productivity gains in the form of headcount and property-related savings.
Regional woes hit Bunzl
In addition to the challenging tax environment, the company said a number of its largest businesses in North America and Continental Europe experienced performance issues, which directly impacted profit. The group specifically cited “execution challenges” in North America and a “weak market” with ongoing deflation in Europe.
This squeezed the distributor’s operating margin, falling to seven per cent from eight previously.
But the firm reiterated its full-year guidance, expecting modest growth in revenue. Bunzl’s revenue edged up 4.2 per cent to £5.8m for the first half.
The London-listed business said its operating margin for the full-year would be “seasonally higher” due to “the benefit of actions taken in North America and Continental Europe to improve performance; easier comparatives in Continental Europe; and Nisbets synergy benefits.”
Adam Vettese, market analyst for eToro, said: “Bunzl has taken decisive steps to drive improvement, including leadership changes, cost savings, and a focus on higher margin own brand products, with early indicators of progress already showing through.”
He added: “While near term earnings are under pressure, Bunzl’s resilience and disciplined expansion provide confidence in its ability to overcome these issues and aim to see shares pare the losses made this year.”
Frank van Zanten, chief executive officer of Bunzl, said: “Notwithstanding a challenging first half for Bunzl, and the ongoing uncertain macro economic backdrop, our teams are very focussed on improving performance, and I remain confident in Bunzl’s underlying resilience and strong business model, and its ability to deliver consistent compounding growth in the medium-term.”