Revenues for the six months to 30 June rose by 7% to £4.85 billion helped by acquisitions and an extra trading day while adjusted operating profits grew by 12.6% to £340.8 million and earnings per share (EPS) grew by 16.1% to 70.1p.
BETTER MIX DRIVES MARGINS
Underlying revenue growth was 2.8%, due to a 13.6% increase in sales of key Covid-related products offset by a 10.8% decline in other product sales. Sales of higher-margin products to the safety, healthcare, cleaning and hygiene sectors were up 29% while sales to the retail and foodservice sectors, where products typically have a lower margin, fell 9% during the half.
This helped lift operating margins by 0.3% to 7% and return on invested capital to 14.4%, while at the same time lowering the firm’s net debt to EBITDA ratio from 1.9 times to 1.6 times.
Thanks to this better than expected performance the board reinstated the final 2019 dividend of 35.8p per share, continuing the firm’s 27-year track record of rising payouts. An interim 2020 dividend of 15.8p per share was also announced.
Chief executive Frank van Zanten was pleased with the firm’s results, especially given the ‘unprecedented demands’ on the business, but said he still expects to face ‘challenging conditions during the second half of the year’.
The firm also announced the acquisition of a Tennessee-based distributor of safety products with $248 million of annual revenues and above-average margins, boosting its US business which already accounts for 56% of sales, and a smaller Irish distributor of flexible packaging.
Shore capital analyst Robin Speakman described Bunzl as ‘a quality operation all round, driven by a strong client service culture with capital allocation and capital returns driving management. With opportunity for growth remaining, with a stable organic platform, we feel the shares deserve a premium rating’.
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