Weak pound drives Bunzl sales as spending spree beats records

THE weak pound has helped deliver a major boost to the half-year results of Bunzl, with revenue up by a fifth and profits climbing, as the company continues its record-breaking spending spree.

The FTSE 100-listed distributor of products that companies need to function but are not core to their business – such as carrier bags to supermarkets, paper cups to coffee shops and safety gear to builders – reported a 20pc rise in sales to £4.1bn and pre-tax profits 17pc higher at £181.9m.

Bunzl is famed for its relentless acquisitions of small, mainly family- owned companies, and its deal machine has continued to run at a record rate, making 11 bolt-on purchases in the year to date.

So far this year, Bunzl has committed to spending a record £546m on deals, including the purchase announced yesterday of safety equipment business HSESF in China, the company’s first acquisition in the country. Though no value for the deal was revealed, Frank van Zanten, the firm’s chief executive, described HSESF as “a very small but good company”.

“We have been scanning the market in China for companies for over three years and it is a very fragmented market,” he said. “We are really just dipping our toe into China – this is not suddenly becoming a billion-dollar market for us, but it is going to grow.”

While at a headline level the group’s growth was strong, once the impact of the pound’s fall was stripped out, the rise in revenue was a more modest 7pc, with pre-tax profits adjusted for amortisation and acquisition costs 5pc stronger. The rate of organic growth during the period was 3.7pc.

Mr van Zanten noted that with 85pc of the company’s sales outside the UK, sterling’s decline has had a “significant positive translation impact”.

He also pointed to the record level of acquisitions Bunzl has made so far this year – far exceeding the previous record of £327m for all of 2015 – and said adding new businesses to the bluechip’s portfolio “continues to be an important part of our growth strategy”.

However, the increased spending is not the result of a conscious decision, but rather a matter of timing, with companies which Bunzl has had on its radar coming up for sale.

North America reported a 7pc sales increase, helped by new business wins and a large customer increasing their spending.

The interim dividend was raised 8pc to 14p, but the results got a lukewarm welcome from investors with the shares closing down 2.1pc at £22.83.