Bunzl PLC (LSE:BNZL) now expects to generate slight underlying revenue growth in 2021 compared to 2020 at constant exchange rates after a strong third quarter.
The international distribution and services group said third-quarter revenue was up 7.8% year-on-year, despite unhelpful exchange rate movements; on a constant exchange rates (CER) basis, growth was 13.0%, of which 4.3 percentage points were contributed by business acquired in the preceding 12 months, while a further 6.2 percentage points of growth was due to a greater number of trading days than in the third quarter of last year (this will reverse in the fourth quarter).
That leaves underlying revenue growth on a CER basis of 2.5%.
The strong recovery in the base business contributed to underlying sales growth of 12.0%, with broad strength across business areas and continued support of product inflation, particularly in North America, the FTSE 100 company said. This growth was largely offset by a 9.4% impact on underlying growth from a decline in sales of top 8 COVID-19 related products, which are primarily own brand. Underlying revenue for the third quarter was roughly 10% higher than the comparable 2019 period.
While top-line expectations have been increased, margin expectations for the year are unchanged, with adjusted operating margin expected to be only slightly ahead of historical levels.
With 2021 continuing to reflect pandemic-related dynamics, Bunzl continues to expect to see a further normalisation of group operating margin in 2022 to more historical levels, as the mix of sector and product sales returns to more typical levels for the group.
“At our recent Capital Markets Day, as well as providing insights into the opportunity that sustainability presents to Bunzl, we highlighted the strength of our compounding strategy which has delivered strong shareholder returns for many years. This track record of success continues with another good trading performance in Q3 and the acquisition of Intergro, which is our 11th acquisition year to date,” said Franz van Zanten, the chief executive of Bunzl.
Intergro, a distributor of agricultural supplies to commercial growers in the Eastern US, was acquired at the end of September.
“Intergro is complementary to our existing agricultural business and broadens the group's product offering to customers. Our acquisition pipeline remains active, supported by the strength of our balance sheet,” van Zanten added.