Proactive Investors - Bunzl PLC (LON:BNZL) shares jumped to a new all-time high after the distributor hiked its interim dividend 10%, launched a £250 million share buyback and raised its outlook for the year.
This followed a first half of 2024 where the FTSE 100-listed company saw revenue decline 0.4% to £5.7 billion though underlying trends improved in the second quarter and yet further in the first two months of the third.
Adjusted operating profit increased 3.9% to £455.5 million, as margins increased to 8.0% from 7.4% a year earlier. Reported profit before tax fell 11.9% to £279.4 million.
The highly acquisitive company announced the eighth addition of the year today, Australia’s PowerVac, which has taken annual committed acquisition spend so far this year to a company record of above £650 million.
Based on the performance for the year to date, including these acquisitions and the improvement in margins, management have upped their adjusted operating profit guidance, now expecting a “strong increase”, with revenue growth predicted to be “robust” at an underlying level but a small decline seen on a reported basis.
Bunzl’s board also hiked their commitment to allocate roughly £700 million per annum primarily towards value-accretive acquisitions and “if required” returning capital to shareholders for each of 2025, 2026 and 2027.
Alongside a 10% dividend increase to 20.1p the buyback announced today begins with immediate effect and the company said it expects to announce another of around £200 million at the time of full-year results.
Chief executive Frank van Zanten hailed the significant increase in operating margin from 6% in 2019 to 8%, “driven by good margin management, including increased own brand penetration, and the impact of recently acquired businesses”.
He said Bunzl has generated around £2.9 billion of free cash flow in that same time, meaning that despite upping spending on acquisitions, debt leverage has remained below target.
“Our acquisition pipeline remains active and our runway of opportunity is substantial,” he said, adding that the board is “committing to steadily return leverage to our target range by the end of 2027, and therefore announce a substantial share buyback that will commence with immediate effect”.
The shares jumped 11% to 3,572p in early trading.