Bunzl profits ‘resilient’ despite slowing global economy and struggling UK sales
Outsourcer Bunzl’s half year results were helped by the weakness of the pound as it boosted revenue and profit despite UK sales lagging behind the rest of its business.
The FTSE 100 distribution giant reported a modest rise in pre-tax profit and nudged its dividend up two per cent. Shares fell in early trading but levelled out as the day went on.
Read more: Bunzl shares dip on slowed growth in the second quarter
Bunzl supplies everything from rubber gloves and cleaning products to hard hats and packaging, and operates a sizable chunk of its business in the United States market.
The figures
Pre-tax profit was £201m for the first half of 2019, after reporting £197m this time last year. Revenue rose 4.7 per cent per cent to £4.5bn over the same period.
Net debt increased by £36.3m to £1.4bn.
Bunzl lifted its dividend to 15.5p, but this was weak against an average dividend growth of nine per cent over the last five years.
Why it’s interesting
A slowdown in the global economy has hurt Bunzl in recent months. It warned revenue growth in the second quarter had slowed in its main US market, while the drop in sales in the UK also hurt its figures. It put the latter down to Brexit related uncertainty, but maintained it had managed a “resilient” first half.
Bunzl has historically grown by buying out smaller companies and adding them to its business, but the number of acquisitions has also slowed.
This is “either because the company is being cautious or business sellers want a higher price than Bunzl is prepared to pay,” according to AJ Bell investment director Russ Mould.
“Perhaps the ultimate sign of Bunzl being very cautious is the pace of dividend growth which has fallen to a mere two per cent.”
Read more: Bunzl shares slump as sales growth slips at start of 2019
What Bunzl said
Chief executive Frank van Zanten said: “Against the background of slowing macroeconomic and market conditions across the countries and sectors in which we operate, Bunzl has produced a resilient operating performance with high cash conversion and an increased dividend.
“Despite continuing economic uncertainties, the board believes that the combination of our strong competitive position, diversified and resilient businesses and ability to consolidate our fragmented markets will lead to further progress.”
Main image credit: Getty