The FTSE 100 is falling this morning but nothing quite like the Bunzl (LSE: BNZL) share price. The £11bn outsourcing group dipped 5.17% in early trading today (17 December), the fastest faller on the index. This follows a mixed trading update ahead of its year end.
Bunzl’s one of those unsung heroes investors routinely overlook, then snap to attention when they see how well its shares have been doing. At least, that’s what happened to me.
It must be more than five years since it first crossed my radar yet I’ve never bought it in that time. So what’s held me back?
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Every time I looked the shares seemed a bit pricey, having just been on a strong run. They’re a little bit cheaper today, so this time I’ve got no excuse.
Despite this morning’s dip, Bunzl shares are up a solid 14.29% over one year and an impressive 69.43% over five.
Bunzl’s easily overlooked because it has no consumer facing role, but quietly supplies everyday items to other businesses, such as disposable coffee cups, cleaning materials, bandages and rubber gloves.
It’s far from dull though, growing fast through constant acquisitions. 2024 was a record year here, as it’s committed to spending £850m on 13 acquisitions. That’s where most of this year’s tepid growth has come from.
Today’s update showed 2024 revenues are set to rise by a steady 3% at constant exchange rates. At actual exchange rates, they’ll either be flat, or fall 1%.
Group revenue growth was driven by acquisitions “with a small decline in underlying revenue over the year”. The pipeline remains strong.
A great dividend track record
Group adjusted operating profit in 2024 will nonetheless “represent a strong increase in comparison with 2023 at constant exchange rates”, Bunzl said, while operating margins will be slightly higher. It’s all a bit underwhelming though.
2025 looks a little brighter, with the board expecting “robust revenue growth in 2025… driven by announced acquisitions and slight underlying revenue growth”. Higher margin acquisitions and “a good underlying margin increase” should help.
Bunzl initiated a £250m share buyback in August, of which around £200m has been completed. It confirmed a further £200m buyback in 2025.
These are challenging times as the cost-of-living crisis drags on and an interest rate stays higher for longer than expected, squeezing business spend. Now I’m wondering how import tariffs will play out on a global business like this one. Bunzl’s priced for growth, with the shares trading at 18.62 times earnings. It’s not exactly a bargain.
Christmas is coming and I have no cash to buy this stock today. Come the New Year, it’ll be top on my shopping list. I’ve waited long enough. I just hope the share price hasn’t recovered by then.
