REG - Bunzl PLC - Trading Statement

BunzlAnnouncement

16/04/2025 07:00

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RNS Number : 1786F  Bunzl PLC  16 April 2025

16 April 2025

 BUNZL Q1 TRADING STATEMENT

Q1 profit below expectations; reduction to 2025 guidance; action plan in place

 

This announcement contains inside information.

 

Bunzl plc, the specialist international distribution and services Group,
provides an update on trading for the period since 31 December 2024 and on the
2025 outlook.

Against a more challenging economic backdrop, Group revenue in the first
quarter grew by 2.6% at constant exchange rates, with underlying revenue(1),
declining by 0.9%. At constant exchange rates, acquisitions, net of disposals,
contributed growth of 5.7%(2) and fewer trading days in the period impacted
revenue by 2.2%. At actual exchange rates, Group revenue increased by 0.8%.
Adjusted operating profit was down significantly year-on-year in the first
quarter, reflective of an operating margin decline driven by performance in
North America and Continental Europe.

 

Business Area update

North America: Since our last update, in a more uncertain macro environment,
we have seen some revenue softness across our North American businesses. This
has resulted in operating margin pressure across the business area, and in
particular it has amplified challenges specific to our largest business, which
primarily services foodservice and grocery customers.

In recent years, our largest business in North America has made good progress
in evolving its strategy to complement its strong third-party supplier
partnerships with an enhanced own brand offering to customers. This has
required substantial investment and change in the sales and operating model,
which has been more challenging to execute than expected. Trading in the first
quarter has also been impacted by continued deflation which has compounded
these execution challenges. Overall, this has resulted in slower than
anticipated volume improvement and own brand growth, an isolated customer
category loss, and higher operating costs which together have driven a
significant decline in adjusted operating profit.

We have taken a series of decisive actions to improve performance. These
include leadership changes to ensure there is a renewed focus on commercial
agility and operational excellence. We are focused on driving organic revenue
growth by empowering the local management, and delivering margin benefits
through further own brand launches, in addition to accelerating cost saving
initiatives. We expect to benefit from a number of these improvements in the
short term while others will extend well into 2026. This strategy will deliver
a stronger and more sustainable platform for long-term profitable growth in
North America.

Continental Europe: Operating margin decline in the first quarter continued to
be driven by dynamics already seen in the second half of 2024, with the
decline broadly in line with expectations. We expect margin management and
cost initiatives to deliver improvement towards the end of the second half of
the year. UK and Ireland: Underlying revenue growth was lower than expected,
driven by deflation, with a decline in operating margin reflective of the mix
effect of Nisbets in the quarter. Rest of the World: strong underlying revenue
growth continues, driven by Latin America, with the business area maintaining
a good operating margin.

2025 guidance update

We reduce our 2025 guidance to reflect the operational challenges faced by our
largest business in North America, and the implications on the remainder of
the year from a more challenging start for the Group. We provide this update
despite significant uncertainties relating to tariffs and their impact on
inflation and economic growth. Although inflation is typically a benefit to
Bunzl, this situation remains dynamic, and any potential benefit from tariffs
together with a potential adverse impact on economic growth, is excluded from
our guidance.

The Group now expects moderate revenue growth in 2025, at constant exchange
rates, driven by announced acquisitions and broadly flat underlying revenue.
Group operating margin for the year is expected to be moderately below 8.0%,
compared to 8.3% in 2024. Operating margin in the first half of the year is
expected to be around 7.0%, with the Group's second half operating margin
seasonally higher and expected to benefit from actions taken(3).

 

Capital allocation update

 

Given the significant macroeconomic uncertainty, we believe it is prudent to
be around the lower end of our target leverage range of 2.0x to 2.5x adjusted
net debt to EBITDA.

We aim to be towards the lower end of our target range by the end of 2025,
after potential acquisition spend, with our cash generative business model
allowing us to continue investing in value-accretive acquisitions, with our
pipeline active, whilst maintaining a strong balance sheet. As a result, we
have paused our buyback programme for the remainder of 2025, having purchased
around £115 million of shares year to date.

Leverage within the target range remains appropriate for Bunzl in the
medium-term, and we will keep our capital allocation options under regular
review.

 

Commenting on today's announcement, Frank van Zanten, Chief Executive Officer
of Bunzl, said:

 

"I am disappointed with our performance in the first quarter in this
challenging trading environment. We are taking decisive action to improve
performance in the Group, particularly with regards to execution in our
largest business in North America.

Overall, my confidence in the Group's compounding growth strategy and
resilient business model remains unchanged, supported by our continuous focus
on improving our offering to customers. Bunzl has a long-term track record of
delivery and the Group continues to be very well placed to navigate periods of
macroeconomic uncertainty given our focus on essential products, the depth of
our customer and supplier relationships and our sector and geographic
diversification, which have been the foundations of Bunzl's resilience over
time. We are further supported by our dedicated and entrepreneurial teams who
I know continue to work tirelessly to drive their businesses forward, and will
be responsive to any changing environments in order to support their
customers."

 

Conference call

 

There will be a live analyst and investor conference call and Q&A session
from 07:30am (BST) today. To join the conference call, please register via
https://www.netroadshow.com/events/login?show=93638b02&confId=80991
(https://www.netroadshow.com/events/login?show=93638b02&confId=80991) or
use the dial-in details below.  Participants are requested to join 10 minutes
before the scheduled start time.

 

 ·         Dial-in number: +44 20 3936 2999
 ·         Access code: 522718

 

The conference call replay will be available on demand later in the day via
Bunzl's Investors section on the corporate website
(https://www.bunzl.com/investors/results-reports-and-presentations/
(https://www.bunzl.com/investors/results-reports-and-presentations/) )

 

Annual General Meeting

 

Our AGM will be held on 23 April 2025, with details available on our website
(https://www.bunzl.com/investors/shareholder-information/agm-information/
(https://www.bunzl.com/investors/shareholder-information/agm-information/) ).

 

The person responsible for arranging the release of this announcement on
behalf of Bunzl is Suzanne Jefferies, Group Company Secretary.

 

Enquiries:

 Bunzl plc                                                        Teneo

 Frank van Zanten, Chief Executive Officer                        Martin Robinson

 Richard Howes, Chief Financial Officer                           Giles Kernick

 Sunita Entwisle, Head of Investor Relations and Communications   Tel: +44 (0)20 7353 4200

 Tel: +44 (0)20 7725 5000

1.     Underlying revenue is organic revenue adjusted for trading days and
net of the benefit of growth in excess of 26% per annum in hyperinflationary
economies, largely in Turkey, which was 0.0% over this period.

2.     Acquisition growth of 6.2%, net of a 0.5% reduction related to
disposals.

3.     The Group now expects net finance expenses in 2025 to be around
c.£120 million. We reiterate our expectation that the full year effective tax
rate will be around 26.0%.

 

 

 

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