Shares in distribution and services group Bunzl (BNZL) fell to an 18-month low after half-year results disappointed investors.
FTSE 100 company Bunzl supplies a wide variety of day-to-day products, such as coffee cups, work boots, safety clothing and cleaning supplies, to organisations all over the world.
Shares in the business slipped 1.6% to £20.00 after reporting barely 1% growth in revenue for the six months to 30 June to £4.53bn, after accounting for currency fluctuations.
Operating profit, after various adjustments, rose just 0.3% to £291.8m, on the same constant currency basis.
RESILIENT BUT NOT EXCITING
Chief executive Frank van Zanten described the firm’s performance as ‘resilient’ despite slowing economic and market conditions. The company has also maintained expectations for the full year.
Consensus forecasts for the company's full year are pitched at just shy of £600m operating profit on £9.45bn revenues, according to Reuters data.
In April Bunzl shares suffered their worst day in a decade falling 9% after the firm reported weaker than expected sales to US grocers and retailers.
READ MORE ABOUT BUNZL HERE
In the US, Bunzl’s key market accounting for nearly 60% of sales and 50% of operating profits, the company again warned of ‘slowing underlying organic revenue growth principally due to grocery’.
ACQUISITIONS NOT DOING IT
It has cut costs and acquired Liberty Glove & Safety in response, to try to increase its market share and offset the slowdown in organic growth, but spending on acquisitions doesn’t seem to be solving the problem.
In continental Europe, which accounts for 20% of sales and nearly 30% of operating profits, underlying revenue growth was better thanks to demand for its products in France, the Netherlands, Denmark, Spain and Turkey.
However, while cleaning and hygiene products sold well, demand for safety gear was weaker due to the ‘continued slowdown in industrial and construction sectors’ and trading in key sectors like hospitality and healthcare was ‘difficult’.
The Rest of the World division, which accounts for just under 10% of sales and 10% of operating profits, experienced good underlying revenue growth but margins were lower and demand for healthcare products in Brazil, one of the biggest emerging markets, was notably weaker.
PAYOUT PLUS SIDE
On the plus side, with nearly 90% of its turnover generated outside the UK the weakness of sterling helped lift sales by between 2% to 3% in the first half, partly offsetting slower growth.
Also, despite the lack of positive comments in the results, the company has bumped up the interim dividend by 2% thereby continuing its 20 year-plus record of raising the pay-out.
