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UPDATE 2-UK's Bunzl sees higher first-half revenue, more acquisitions
June 28, 2017 / 7:14 AM / 3 months ago

UPDATE 2-UK's Bunzl sees higher first-half revenue, more acquisitions

(Adds investment firm, analyst comments, details, updates shares)

By Noor Zainab Hussain and Esha Vaish

June 28 (Reuters) - British business supplies distributor Bunzl estimated a better-than-expected 3 percent to 4 percent rise in first-half underlying revenue, boosted by recent acquisitions and business won in North America towards the end of 2016.

Bunzl’s shares rose 3.6 percent at 2,394 pence at 1005 GMT, making it the biggest gainer on London’s bluechip index.

Analysts said the mid-point of the estimated revenue growth for the six months to June 30 implied an acceleration of underlying growth to about 5 percent over the second quarter, from the 2 percent reported in the first quarter.

As a supplier of low-value products such as carrier bags and toilet rolls to supermarkets, hospitals and hotels, Bunzl is more exposed to consumer spending than most of its support services peers that contract orders from large private firms and public budgets.

However, while a slide in UK consumer confidence has squeezed retail sales there, most of Bunzl’s revenue comes from North America, where it expects to see an uplift from President Donald Trump’s plan for more local manufacturing.

Bunzl posted a 19 percent rise in reported revenue, thanks to strong North America growth, favourable currency moves and benefits from recent deals. At least three analysts said revenue growth beat their expectations.

Citi analysts bumped up their full-year growth forecast to 4.25 percent from 3 percent, citing the “impressive growth” of at least 7 percent in North America due to additional business won from one of Bunzl’s existing large grocery customers.

“It might not be as exciting as picking an oil explorer or junior miner... but investing is about keeping your money safe as much as it is making a return on it and Bunzl (update) shows that the best long-term picks can be the dull ones,” said Russ Mould, investment director at AJ Bell.

Bunzl has spent billions buying small firms since 2004 to expand its operations or enter new markets and uses its scale to then drive growth, and said on Wednesday it had acquired eight businesses so far this year, adding annualised revenue of 370 million pounds.

The company has spent about 290 million pounds on these acquisitions, far greater than the 184 million pounds it spend on deals in the whole of 2016. However, acquisitions continued to be an important part its growth strategy, it said.

“With a promising pipeline of additional opportunities, I would expect us to complete further acquisitions as the year progresses,” CEO Frank van Zanten said. ($1 = 0.7804 pounds) (Reporting by Noor Zainab Hussain and Esha Vaish in Bengaluru; Editing by Amrutha Gayathri and Sunil Nair)

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