Bunzl PLC (LSE:BNZL) shares surged to an all-time high after the company announced impressive interim results and a substantial share buyback programme. The FTSE 100-listed distributor reported a 10% increase in its interim dividend and launched a £250 million share buyback, while also raising its outlook for the year.
In the first half of 2024, Bunzl’s revenue slightly declined by 0.4% to £5.7 billion. However, the company witnessed improved underlying trends in the second quarter, which further strengthened in the first two months of the third quarter. Adjusted operating profit rose by 3.9% to £455.5 million, with margins expanding from 7.4% to 8.0% compared to the previous year. Reported profit before tax, on the other hand, decreased by 11.9% to £279.4 million.
Bunzl has been actively pursuing acquisitions, with the recent addition of Australia’s PowerVac marking the eighth acquisition this year. The company’s annual committed acquisition spend has now surpassed £650 million, setting a new record.
Given the strong performance year-to-date and the positive impact of acquisitions and margin improvements, Bunzl’s management has raised its adjusted operating profit guidance, anticipating a “strong increase.” Revenue growth is expected to be “robust” on an underlying basis, although a small decline is predicted on a reported basis.
The company’s board has also increased its commitment to allocate approximately £700 million per annum primarily towards value-accretive acquisitions and, if necessary, return capital to shareholders for each of the years 2025, 2026, and 2027.
Chief Executive Frank van Zanten praised the significant increase in operating margin from 6% in 2019 to 8%, attributing it to effective margin management, increased own brand penetration, and the impact of recently acquired businesses. He highlighted that Bunzl has generated around £2.9 billion of free cash flow during this period, allowing the company to increase acquisition spending while maintaining debt leverage below target.
Looking ahead, van Zanten expressed optimism about Bunzl’s acquisition pipeline and the substantial runway of opportunity. The board is committed to steadily returning leverage to the target range by the end of 2027 and has announced a substantial share buyback that will commence immediately.
Investors reacted positively to the news, with Bunzl shares jumping 11% to 3,572p in early trading.
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