Bunzl Plc (BNZL) is a specialist distribution company engaged in the distribution of non-food consumable products to markets such as grocery, foodservice, cleaning and hygiene, healthcare, non-food retail and safety. The company offers its products with a unique business concept to its customers.
In Q1 FY2019 trading updates, the group’s reported revenue surged by 4% at actual currency rate. However, on a constant currency basis, revenue rose by 2.5% approximately. In the trading statement, the group also announced that it had acquired a Netherland based distributor, Coolpack, which is primarily engaged in the supply of specialist packaging to supermarkets and food service and pharma sector.
In FY2018 period, the Bunzl's top-line grew by 6% to £9,079.4 mn on account of strong organic growth and benefited from acquisitions in North America. Adjusted operating profit stood at £614 million, up by 4% as compared to the FY17 adjusted operating profit of £589.3 million. The consistent business model and strategy of Bunzl Plc, in combination with their ability to reinvest strong cash flows, helped them to register adjusted earnings per share of 129.6 pence for the year ended 31st December 2018, up by 12% from FY17 adjusted EPS at constant currency exchange rate. During the FY18, the company reported strong cash conversion of 94%. Dividend for FY18 stood at 50.2 pence and increased by 9% on a year-on-year basis.
Some market analysts downgraded Bunzl, the disposables distributor, to “underperform” from “neutral”, due to the combination of limited organic growth and falling underlying margins which will offset the ongoing opportunity to grow the business via mergers and acquisitions.
Daily Chart as at May-03-19, after the market closed (Source: Thomson Reuters)
On 3rd May 2019, Bunzl Plc stock closed at GBX 2,246, up by 0.402 per cent against its previous day closing price. Stock’s 52 weeks High and Low is GBX 2,554.60/GBX 2,152. At the time of writing, the share was trading 12.08 per cent lower than the 52w High and 4.37 per cent higher than the 52w low. The company's stock beta was 0.73, reflecting lower volatility as compared to the benchmark index. The outstanding market capitalisation was around £7.56 billion with a dividend yield of 2.24 per cent.
Bunzl faces pressure on its returns and in many ways for some it might be a classic sell, with low-end market growth, decreasing returns and increasing costs of M&A. While Q1 was not as per expectations, market players are watching out for any recovery in the share price, which might find support from potential M&A activities.
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