Bunzl reported full-year revenue of £11.8bn, up 3.1% ignoring currency moves. Growth was driven by acquisitions, which more than offset a modest decline in underlying revenue. Underlying trends improved in the second half, driven by slight volume growth and a small easing of deflation.
Adjusted operating profit rose 7.2% to £976mn. The increased penetration of own-brand products, higher margin acquisitions, and good margin management all contributed to margins rising from 8.0% to 8.3%.
Free cash was broadly flat at £634mn and net debt, including leases, rose from £1.8bn to £2.4bn.
A final dividend of 53.8p was announced, taking the total dividend for the year to 73.9p up 8.2%, alongside a new £200mn buyback.
Bunzl maintained its guidance for 2025, expecting robust revenue growth, driven by acquisitions and slight underlying revenue growth, with operating margins in-line with 2024.
The shares fell 6.1% in early trading.
Our view
It’s been a tough year for Bunzl, the distribution powerhouse that supplies everyday essentials in the UK, Europe, and North America - like packaging, cleaning supplies, and safety gear. But Bunzl’s 2024 results show a company shaking off headwinds, with organic growth finally starting to display some positive signs in the second half.
It’s no secret that acquisitions are doing the heavy lifting and recent organic performance has been a struggle. Prices have been falling in many of Bunzl’s markets after a period of rampant inflation and that’s been bad news for top line growth. Key markets like North America (56% revenue) are showing brighter volume trends, and pricing looks set to flip positive soon – but it’s taking a little longer than first thought.
Bunzl is a well-run organisation, and margins have been improving despite the softer market. Cost inflation has been a challenge, but efficiency gains have done a job to limit the impact. Bunzl’s businesses have also been making good progress on the sales of higher margin own brand products, and the use of online channels.
Then there’s the acquisitions. Snapping up smaller businesses, at higher margins, in the highly fragmented market is a key strategy, and one we think has scope to drive robust growth. The pipeline for future deals is a major strength too, backing up the £700 million-a-year acquisition pledge.
There are drawbacks to this approach, if the pool of target companies dries up or a business needs to raise external cash to fund acquisitions, then it's not usually sustainable. Bunzl's got this covered with a highly cash-generative business model and a strong balance sheet with plenty of room to tap debt markets if needed.
We expect to see debt creep higher as acquisitions marginally outpace cash generation over the next couple of years. But Bunzl is currently a good clip below its target levels when looking at debt vs profits, so there’s room for a spree of acquisitions in the near term.
We've been genuinely impressed by Bunzl's margin performance and remain supportive of the resilient portfolio and highly cash-generative model. We're mindful that organic weakness puts a lot of pressure on acquisitions to do the hard work and expect top-line growth to be a near-term challenge.
Environmental, social and governance risk
General Industrial companies are medium risk in terms of ESG but can trend up to the higher end of the spectrum depending on subindustry. The primary risks can include labour relations, emissions (either product or production-based), business ethics and product governance. Other concerns are waste and health & safety.
According to Sustainalytics, Bunzl’s overall management of material ESG issues is strong.
While its overall reporting could be further improved, Bunzl has implemented initiatives such as linking executive pay to ESG goals, establishing a board committee for ESG oversight, adopting a strong environmental policy, and providing robust whistleblowing channels.
Bunzl key facts
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