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Bunzl beats forecasts

The group beat forecasts in spite of increasing costs in the US and trading challenges in the UK
February 25, 2019

Bunzl's (BNZL) share price wasn't immune to the general markdown in global equity markets during the final quarter of 2018, but the group's acquisitive strategy, while delivering scale benefits, hasn't come at the expense of the margin - down by a relatively modest 10 basis points at the operating level to 6.8 per cent, but it wasn't all plain sailing. Challenging market conditions for the construction and industrial sectors in the UK and Ireland constricted profitability in those locales, while operating cost inflation hindered financial performance in its North American markets.

IC TIP: Buy at 2446p

The global distribution and services group delivered sales growth (at constant currencies) of 6 per cent or higher across all divisions, with the standout performance attributable to continental Europe, where revenue and the operating margin expanded by 12 per cent and 40 basis points respectively.

After a bumper year for acquisitions in 2017, when Bunzl spent a record £616m, it settled at a more sedate £183m in 2018. The group added six businesses to its stable and revealed a new deal to acquire Liberty Glove & Safety, a personal protection equipment company management bought as part of its strategy to consolidate the fragmented US market.

Broker UBS is forecasting EPS of 132p in 2019 (from 130p in 2018). 

BUNZL (BNZL)   
ORD PRICE:2,446pMARKET VALUE:£8.23bn
TOUCH:2,444-2,447p12-MONTH HIGH:2,547pLOW: 1,919p
DIVIDEND YIELD:2.1%PE RATIO:25
NET ASSET VALUE:504p*NET DEBT:82%
Year to 31 DecTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20146.1630064.535.5
20156.4932371.038.0
20167.4336380.742.0
20178.5840994.246.0
20189.0842598.450.2
% change+6+4+4+9
Ex-div:23 May   
Payment:01 Jul   
Includes intangible assets of £2.38bn, or 708p a share