- First-half results broadly in line
- Second-half improvement seen
- £200 million buyback restarts
Logistics and distribution group Bunzl (BNZL) reassured investors with its first-half trading update and the resumption of its £200 million share buyback programme.
The shares gained 126p or more than 5% to £25.10 in early trading taking them to the top of the FTSE 100 leader board.
BETTER OUTLOOK
During a ‘challenging’ first half for the firm, revenue was up 0.8% on a reported basis and 4.2% on a constant-currency basis to £5.76 billion.
However, operating profit fell 14% on a reported basis to £300 million due to operational problems with its North American and Continental European businesses, as the group warned in April causing a major sell-off in the shares.
On a positive note, there has been ‘good progress’ in the first half with improving the operational performance of the business and the firm kept its 2025 outlook.
‘Actions taken in our largest business in North America have re-energised the team and we are seeing early positive indicators of success, with the profit momentum seen through the first half in line with our expectations,’ said chief executive Frank van Zanten.
‘This is a market-leading business, and while the benefits of some actions are not expected to drive improvements until well into 2026, we are focused on creating a stronger platform for its long-term profitable growth.
‘In Continental Europe, the operating environment remains challenging, and our French business has been particularly impacted by ongoing deflation and a weak market, but we have seen improved performance in Benelux.’
The firm also announced it would press ahead with the remaining £86 million of its previously scheduled £200 million share buyback after putting it on hold in April.
ANALYST VIEW
Jefferies’ analyst Ryan Flight, who has an Underperform rating on Bunzl, noted there was a slight improvement in second-quarter trading but against a very soft prior-year number, while revenue and earnings were in line with consensus.
Also, the firm’s guidance for broadly flat underlying revenue growth and an operating margin ‘moderately below’ 8% compared with 7% in the first half was unlikely to prompt downgrades.
The decision to resume the buyback may reflect the subdued level of M&A activity year-to-date, suggested Flight, with just £120 million of deals completed against an average annual spend of more than £500 million.
