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Bunzl set to report growth as firm sheltered from inflation effects

Specialist distribution company Bunzl looks set to report strong revenues as global businesses remain reliant on the essential products it sells, experts have said.

The FTSE 100 company – which supplies businesses around the world with a variety of products, including coffee cups and food labels to department stores and hospitals – is expected to tell shareholders that its revenue and profits have grown during the first half of the year.

While many companies have reported a fall in consumer spending as a result of soaring prices, Bunzl could be sheltered from the impact of the economic downturn thanks to its business model, analysts said.

This is because it supplies essential products to businesses rather than consumers directly and so it is less likely to be affected by people cutting back on non-essential purchases to save money, according to AJ Bell.

In fact, it means the businesses could have more pricing power – meaning it can raise prices and still not expect sales to fall as a result.

Bunzl’s chief executive, Frank van Zanten, raised its profit guidance for 2022 for the second time in June, telling investors to expect to see very good revenue growth in its company results unveiled on Tuesday August 30.

Its organic revenue growth could be around 9% in the first six months of the year, totalling more than £5.7 billion, analysts at Shore Capital Markets predicted.

For the full year, the group is expected to report pre-tax profits hitting £633 million, up by 11%, AJ Bell said.

It added that shareholders will be keeping an eye on the dividend, with the company historically increasing its annual shareholder payment, only halted by the pandemic. Analysts will be looking for a 9% increase to 62p per share for 2022 as a whole.

Furthermore, investors will be eagerly anticipating any updates on Bunzl’s newest acquisitions, which typically take up a substantial chunk of the company’s cash flow.

The firm spent £508 million on 14 acquisitions in 2021 and it has already struck six deals costing £220 million this year, AJ Bell said.

Charlie Williams, equity research assistant at Hargreaves Lansdown, said: “The Covid-19 related boost in sales may be normalising for Bunzl, but their base business looks to be performing well.

“Revenue guidance has been upgraded from ‘moderate’ to ‘very good’ for the year and it’ll be interesting to see by how much cost inflation has been passed onto buyers through regular pricing reviews.

“Bunzl’s own-brand products can be sold and distributed for higher margins. As higher prices add pressure to consumer finances, operating margins should benefit as buyers opt for cheaper products.”