The Bunzl (LSE: BNZL) share price has had a tough ride in 2025, down 24% since the start of the year. But it’s been picking up a bit in the past couple of weeks. And on Tuesday (26 August), the stock gained 4% in early trading on the back of a relatively upbeat first-half report.
April brought a profit warning, based on toughening conditions in the firm’s North American markets — with revenue softness, operating margin pressure, and “amplified challenges specific to our largest business, which primarily services foodservice and grocery customers.”
Bunzl lowered its 2025 guidance and paused its share buyback programme, having returned £114m of the planned £200m. The share price crashed 26% on the day.
Interim update
But now Bunzl is resuming its share repurchases, aiming to complete the remaining £86m in the second half.
Revenue rose 4.2% in the half, with adjusted operating profit down 7.6%. Again that’s at constant exchange rates. As reported, revenue only blipped up 0.8% and adjusted operating profit fell 11.2%.
The company made five acquisitions so far this year, to the tune of around £120m committed spend. And perhaps to boost confidence, the board raised the interim dividend. It’s only by 0.5% to 20.2p, but it’s the right direction. And, perhaps crucially, adjusted earnings cover it 3.9 times.
American turnaround
Speaking of the American business, CEO Frank van Zanten spoke of “early positive indicators of success, with the profit momentum seen through the first half in-line with our expectations.” He did, however, add that “the benefits of some actions are not expected to drive improvements until well into 2026.”
The company maintained its downgraded full-year outlook. So we should expect “moderate revenue growth in 2025, at constant exchange rates” — but no real change in underlying revenue. The group’s operating margin “is expected to be moderately below 8.0%, compared to 8.3% in 2024.”
My overall take is that it’s going to be a tough year, but probably not as tough as investors feared in April. It’s a nice change to see a profit warning followed by something relatively positive — when we tend to expect warnings to be followed by worse.
What I like about Bunzl
The company expects full-year dividend cover by earnings of about 2.4 times. The forecast yield of 3.1% might not be huge. But strong cover plus a track record of progressive rises can be very important for long-term income investors.
Looking at liquidity, adjusted net debt-to-EBITDA of 1.9 times came in “around the lower end of our target leverage range” of 2 times to 2.5 times. In a year of pressure on margins and profits, I reckon that’s pretty good. And I can’t help thinking the company suspended the share buyback out of conservative caution rather than panic — and perhaps didn’t need to.
I still fear we might see more problems before Bunzl is past the worst. And the year could yet bring further share price pressure. But for investors seeking long-term progressive dividends, I think it has to be one to consider.
