Bunzl achieve good revenue growth of 6.3%

Bunzl plc (LON:BNZL), the specialist international distribution and services Group, today publishes its half yearly financial report for the six months ended 30 June 2021.

Highlights include:

• Good revenue growth of 6.3% at constant exchange rates, supported by a strong recovery in the base business♯ and acquisitions; Resilience through the pandemic, with underlying revenueⱡ 5.7% higher than in the first half of 2019

• Adjusted operating profit* increase of 14.7% at constant exchange rates and corresponding rise in adjusted earnings per share* of 18.1%; Reported operating profit up 8.8% and reported basic earnings per share up 13.8%

• Continued strong cash generation with cash conversion* of 100%, and net debt to EBITDA† of 1.4 times with substantial headroom for acquisition growth

• Dividend per share growth of 2.5% reflects the Group’s commitment to ensuring sustainable dividend growth

• Two further acquisitions announced today, taking the total to eight acquisitions year to date; pipeline remains active

• Alternative performance measure (see Note 2).

◊ Growth at constant exchange rates is calculated by comparing the H1 21 results to the H1 20 results retranslated at the average exchange rates used for H1 21.

∆ During 2020, the Board reinstated the previously cancelled 2019 final dividend of 35.8p per share as an additional 2019 interim dividend which was paid in November 2020. This is not included as a component of the 2020 dividend in the table above for comparative purposes.

† At average exchange rates and based on historical accounting standards, in accordance with Group’s external debt covenants.

ⱡ Underlying revenue is a measure of revenue over comparative periods at constant exchange rates, excluding the incremental impact of acquisitions and disposals and adjusted for differences in trading days between periods.

♯ Base business defined as underlying revenue excluding the top 8 Covid-19 related products (masks, sanitisers, gloves, disinfectants, coveralls, disposable wipes, face shields and eye protection).

North America (59% of revenue and 53% of adjusted operating profit*†)

• Underlying revenue growth of 10.6% driven by continued recovery and product inflation although certain Covid-19 related products started to experience deflation in the second quarter

• Strong operating margin* of 7.0% up from 5.7%, with some operating cost inflation more than offset by favourable product cost inflation and operating efficiencies in addition to higher margin acquisitions

• Strong grocery growth with continued customer demand alongside product cost inflation, although the availability of salad bars and other freshly prepared foods remain below pre-pandemic levels

• Very strong growth of foodservice redistribution, driven by further reopening of in-restaurant dining, against the backdrop of pent-up demand and inflation on packaging products

• Safety benefited from the acquisition of MCR Safety, although demand remained soft in certain end markets

Continental Europe (20% of revenue and 24% of adjusted operating profit*†)

• Underlying revenue declined by 11.2%, driven by the reduction of the exceptional larger Covid-19 related sales seen in 2020. Excluding larger Covid-19 related sales underlying revenue grew modestly

• The negative impact of Covid-19 related lockdowns for most of the period limited the pace of base business recovery, although smaller Covid-19 related sales continued to support with only a moderate decline year-on-year

• Operating margin* of 9.4%, down from 11.4%, reflects the reduction of larger Covid-19 related sales and the associated impact on a partly fixed cost base

• In France, our cleaning & hygiene business was impacted by Covid-19 related restrictions, although sales into the foodservice sector performed better than the prior year

• The Netherlands saw modest growth in grocery and good growth in e-commerce fulfilment, but restrictions impacted other sectors

UK & Ireland (12% of revenue and 6% of adjusted operating profit*†)

• Underlying revenue declined by 10.3%, driven by the reduction in exceptional larger Covid-19 related sales and due to Covid-19 related restrictions remaining in place throughout the first half of 2021 impacting the pace of base business recovery. Excluding larger Covid-19 related sales underlying revenue was broadly stable

• Operating margin* of 3.9% down from 4.7%, reflects the reduction of larger Covid-19 related sales on a partly fixed cost base and the recovery of the base business where margins remain lower than pre-pandemic levels

• Safety recovery was impacted by the slow return to normal activity amongst manufacturing and construction customers, with the recovery in cleaning & hygiene also limited by the number of people yet to return to offices

• Foodservice recovered very strongly in Q2, with improved performance over the quarter, but continued to be affected by reduced capacities in restaurants and hotels

Rest of the World (9% of revenue and 17% of adjusted operating profit*†)

• Very strong underlying revenue growth of 12.3% driven by Latin America. Operating margin* increased from 11.7% to 14.2% with a substantial increase in adjusted operating profit* in Latin America

• Price inflation in key Covid-19 related products, as well as currency-driven inflation, in Latin American markets continued to support growth, although price normalisation was seen in the second quarter

• Australasia performance was impacted by the increase in Covid-19 related restrictions in the second quarter which offset the partial recovery in foodservice and safety seen earlier in the year

• Alternative performance measure which excludes charges for customer relationships and brands amortisation, acquisition related items, non-recurring pension scheme charges and the profit or loss on disposal of businesses and any associated tax, where relevant. None of these items relate to the underlying operating performance of the business and, as a result, they distort comparability between businesses and reporting periods. Accordingly, these items are not taken into account by management when assessing the results of the business and are removed in calculating the profitability measures by which management assesses the performance of the Group. Further details of these alternative performance measures are set out in Note 2. Unless otherwise stated operating margin in this review refers to adjusted operating profit as a percentage of revenue.

◊ Growth at constant exchange rates is calculated by comparing the H1 21 results to the results for H1 20 retranslated at the average exchange rates used for H1 21.

† Based on adjusted operating profit and before corporate costs (see Note 3).

ⱡ Underlying revenue is a measure of revenue over comparative periods at constant exchange rates, excluding the incremental impact of acquisitions and disposals and adjusted for differences in trading days between periods.

Commenting on today’s results, Frank van Zanten, Chief Executive Officer of Bunzl, said:

“As our first half results have demonstrated, our colleagues continue to navigate the challenges associated with the pandemic incredibly well.  While some regions have seen a strong recovery, others have experienced greater pandemic-related restrictions at various points over the last six months.  One of the key strengths of our decentralised business is the ability to respond to local situations, enabling a consistent focus on delivering the right solutions for our customers. Whilst we are now seeing a reversal in Covid-19 related sales, this has been more than offset by the recovery experienced in our base business over the first half. The Group’s performance over the first half and the excellent underlying revenue growth we have delivered over a two year period demonstrate the resilience of our diversified portfolio. 

Our outlook for 2021 is unchanged and we continue to expect, at constant exchange rates, underlying revenue to be moderately higher than the pre-pandemic period in 2019.  Acquisitions will further contribute to growth, with £134m committed spend year to date, and an active pipeline supported by substantial financial headroom. Looking ahead, we expect future growth to be supported by a recovery in the base business and economic activity, enhanced hygiene trends and our differentiated offering of sustainable and responsible solutions.

We look forward to our Capital Markets Day on 11 October 2021, where we will give further insight on the strategic priorities for Bunzl.”