Bunzl plc (LON:BNZL), the specialist international distribution and services Group, has published its half yearly financial report for the six months ended 30 June 2022.
Financial results
| H1 22 | H1 21 | Growth as reported | Growth at constant exchange*◊ | |
| Revenue | £5,650.8m | £4,866.6m | 16.1% | 12.4% |
| Adjusted operating profit* | £411.4m | £366.8m | 12.2% | 8.6% |
| Adjusted profit before income tax* | £380.5m | £338.4m | 12.4% | 8.8% |
| Adjusted earnings per share* | 85.7p | 77.7p | 10.3% | 6.9% |
| Interim dividend | 17.3p | 16.2p | 6.8% |
Statutory results
| Operating profit | £327.5m | £304.1m | 7.7% |
| Profit before income tax | £296.6m | £275.7m | 7.6% |
| Basic earnings per share | 66.2p | 63.3p | 4.6% |
Highlights include:
| · | Strong revenue growth of 12.4% at constant exchange rates, driven by product cost inflation and continued volume recovery in the base business♯, and growth from acquisitions |
| · | Adjusted operating profit* increase of 8.6% at constant exchange rates and rise in adjusted earnings per share* of 6.9%; Reported operating profit up 7.7% and reported basic earnings per share up 4.6% |
| · | Adjusted operating profit 41% higher at constant exchange rates compared with the first half of 2019, demonstrating the strength and resilience of the Bunzl model |
| · | Resilient free cash flow generation, with cash conversion of 86% despite the impact of inflation and greater inventory held to support service levels to customers during supply chain disruption |
| · | Interim dividend per share growth of 6.8% consistent with the Group’s commitment to ensuring sustainable dividend growth |
| · | Net debt to EBITDA*† of 1.6 times provides substantial headroom for further acquisitions |
| · | Six acquisitions announced year to date with a total committed spend of more than £225 million |
* Alternative performance measure (see Note 2).
◊ Growth at constant exchange rates is calculated by comparing the H1 22 results to the H1 21 results retranslated at the average exchange rates used for H1 22.
♯ Base business defined as underlying revenue excluding the top Covid-19 related products (including masks, sanitisers, disposable gloves, disinfectants, coveralls, disposable wipes, face shields and eye protection).
† At average exchange rates and based on historical accounting standards, in accordance with Group’s external debt covenants.
H1 22 performance highlights:
| Underlying revenue growth*ⱡ contribution | H1 22 | Underlying revenue growth*ⱡ by sector | H1 22 | |
| Base business♯ | 15.4% | Foodservice and Retail | 21% | |
| Covid-19 related orders | (6.1)% | Cleaning & Hygiene, Safety and Healthcare | (4)% | |
| Group total | 9.3% | Grocery and other | 11% |
| · | Group underlying revenue growth of 9.3% reflected the very strong growth in the base business, driven by product cost inflation and supported by volume growth, which more than offset the expected decline in Covid-19 related sales |
| · | The base business saw very strong revenue growth across North America, Continental Europe and UK & Ireland, driven by strong product cost inflation. This was complemented by volume recovery in Continental Europe and UK & Ireland, due to the reduced level of Covid-19 related restrictions compared to the prior year |
| · | Reduced Covid-19 related sales, due to the year-on-year impact of deflation on certain Covid-19 related products and volume decline, affected all business areas. Rest of the World was particularly impacted given the higher proportion of Covid-19 related sales generated in Latin America in the prior year |
| · | The foodservice and retail sectors combined saw very strong underlying revenue growth, driven by significant inflation and recovery in the base business, despite a decline in Covid-19 related sales |
| · | The cleaning & hygiene, safety and healthcare sectors were impacted by the decline in Covid-19 related sales, with cleaning & hygiene also continuing to be impacted by work from home trends, although the safety base business in North America started to see some improvement. Combined, underlying revenue for these sectors remained strongly ahead of the comparable period in 2019 |
| · | Underlying revenue in the grocery sector grew very strongly, driven by significant product cost inflation |
| · | In addition to underlying revenue growth, Group revenues were further supported by 3.0% growth from the incremental impact of acquisitions |
| · | Inflation trends overall have been somewhat supportive to operating margin |
| · | Given our performance year-to-date, we now expect the Group operating margin in 2022 to be higher than historical levels and only slightly lower than that achieved in 2021 |
North America (61% of revenue and 55% of adjusted operating profit*†)
| · | Underlying revenue grew strongly, despite a decline in Covid-19 related sales, driven by substantial product cost inflation, particularly in grocery and foodservice |
| · | Foodservice and grocery performance drove very strong base business revenue growth, while the cleaning & hygiene sector continued to be impacted by work from home trends. The safety base business started to see some improvement as conditions started to ease for customers in end markets |
| · | Operating cost inflation was high, driven by fuel and freight costs. However, whilst wage rates remained high, they largely stabilised over the period, moderating their impact on operating cost inflation compared to the second half of 2021 |
| · | Negotiations with our largest customer by revenue are ongoing |
Continental Europe (18% of revenue and 23% of adjusted operating profit*†)
| · | Underlying revenue grew strongly, despite a decline in Covid-19 related sales, driven by strong product cost inflation in foodservice and retail and a recovery in base business volumes, which was attributable to the relaxation of the Covid-19 related restrictions that had impacted the comparable prior year period |
| · | France benefited from a recovery in its cleaning & hygiene and foodservice businesses, supported by product cost inflation |
| · | The Netherlands saw very strong growth in foodservice and retail, driven by inflation and new business wins, with the retail business relocating to a larger facility to support demand |
UK & Ireland (12% of revenue and 9% of adjusted operating profit*†)
| · | Underlying revenue grew very strongly, despite a decline in Covid-19 related sales, driven by similar dynamics to those in Continental Europe |
| · | The strong improvement in the base business drove a meaningful improvement in operating margin |
| · | Investment in operating efficiency continued, with the ongoing roll-out of new technologies to support the business |
Rest of the World (9% of revenue and 13% of adjusted operating profit*†)
| · | Underlying revenue grew very strongly in Asia Pacific, supported by growth in both the base business and larger Covid-19 related orders, whilst in Latin America underlying revenue was strongly impacted by the reduction in Covid-19 related sales, as expected |
| · | Overall, underlying revenue for Rest of the World was broadly flat, with acquisitions in Asia Pacific providing good support to total growth |
| · | Adjusted operating profit and operating margin decline reflected the reduction in higher margin Covid-19 related sales, although margins remain significantly higher than in the comparable 2019 period |
* 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 22 results to the results for H1 21 retranslated at the average exchange rates used for H1 22.
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 as well as for growth delivered in excess of 26% per annum in hyperinflationary economies.
♯ Base business defined as underlying revenue excluding the top Covid-19 related products (including, masks, sanitisers, disposable gloves, disinfectants, coveralls, disposable wipes, face shields and eye protection).
† Based on adjusted operating profit and before corporate costs (see Note 3).
Commenting on today’s results, Frank van Zanten, Chief Executive Officer of Bunzl, said:
“The strength of our first half results is testament to the dedication of our colleagues and the resilience of our value-added business model. Over the period, our teams have been agile in navigating substantial inflation and supply chain disruption, while supporting recovery in the base business and continuing to provide our customers with essential products and services that are crucial to their operations. Our good performance has also been enabled by the depth and flexibility of our global supply chains.
We remain focused on continuing to execute our long-term compounding growth strategy. So far this year we have announced six acquisitions and have an active pipeline with good balance sheet headroom. We believe the merits of joining Bunzl have been amplified over the last few years, supporting our long-term strategic commitment to investing in businesses that drive growth and returns for the Group. Sustainability remains a key focus across the Group, and we continue to use our position and expertise to innovate and enable customers to transition to packaging products that support the circular economy, as well as investing in solutions that benefit the environment, communities, our supply chain and our people.
While mindful of the economic outlook, I believe our talented teams, the inherent resilience of our business model and diversification of our portfolio across sectors and regions, as well as our consistent focus on our strategic priorities, will continue to support the Group’s performance and maintain our strong track record of value creation.”
