Bunzl says actions underway to improve performance

Bunzl PLC reported H1 2025 trading in line with expectations following its prior profit warning, with underlying revenue broadly flat and total revenue up to 1% at actual exchange rates. While H1 operating margin was 7%, matching earlier indications, the company anticipates full-year operating margins to reach nearly 8% and expects improved performance in the second half, driven by ongoing actions in North America and Continental Europe to address previous challenges.

Analysis

Bunzl PLC has issued a reassuring trading update, signaling stabilization after its profit warning two months prior. For the first half of 2025, the company reports trading in line with expectations, with underlying revenue projected to be "broadly flat" year-over-year. Total group revenue is expected to increase by approximately 4% at constant exchange rates (or up to 1% at actual rates), indicating that growth is being driven entirely by acquisitions rather than organic performance. The H1 operating profit margin of around 7% confirms the lowered guidance from April, but management anticipates an improvement in the second half. The full-year forecast is for "moderate revenue growth," still reliant on acquisitions, and an operating margin creeping up to "almost 8%." This expected margin improvement is contingent on seasonally higher H2 performance and the success of specific improvement initiatives in North America and Continental Europe, the regions previously cited as challenging. While this update mitigates near-term downside risk, the full-year margin guidance of nearly 8% remains below the 8.3% achieved in the prior year, highlighting that a full recovery is not yet priced in.

Key Decisions for Investors

• Investors should view this update as a sign of stabilization rather than a full recovery, as underlying revenue remains flat and growth is dependent on acquisitions.
• The primary catalyst for upside is the successful execution of performance improvement plans in North America; monitor future earnings for tangible evidence that these actions are delivering the guided H2 margin uplift.
• Given that full-year operating margins are still guided to contract to nearly 8% from 8.3% last year, temper expectations for a rapid return to peak profitability and evaluate positions based on a gradual turnaround narrative.