My preferred investment strategy is to hunt down a top UK share that’s suffered a short-term setback and is cheaper as a result. Last year, I spotted a perfect example and have written about it regularly since.
Its name? Bunzl (LSE: BNZL). Many readers may not recognise it. It’s always flown beneath the radar, even while delivering steady share price growth and hiking its dividend every year for more than three decades. The Bunzl share price has nudged up 2% following today’s full-year results, even as global markets plunge on Iran war fears. Is there more to come?
Bunzl is a distribution and outsourcing group supplying safety and hygiene equipment, chemicals, packaging, disposable tableware, protective gear, and first-aid kits. The kind of things businesses need but don’t shout about.
FTSE 100 dark horse
It’s hardly glamorous, but Bunzl has muscle. It has expanded worldwide through an aggressive acquisition strategy, buying a dozen businesses in a good year. I’d watched the shares enviously for years as the dividend income and share price growth compounded quietly. I called it the ultimate FTSE 100 dark horse and promised myself I’d buy it one day. Then last year the shares suddenly plunged by a third after a profit warning linked to slowing US sales. Tariff concerns added to the pressure. I dived in, buying three times as the price retreated.
Today, I’m down 5% but that’s okay. Recoveries take time. I’m prepared to be patient, particularly as Bunzl yields around 3.5%, which pays me to wait.
Today’s (2 March) results weren’t great, but were better than markets feared. Adjusted operating profit actually fell 4.3% at constant exchange rates to £910.3m. Revenues, however, rose 3% to £11.84bn, largely driven by eight completed acquisitions across seven countries, at a cost of £132m. That’s relatively quiet by its standards, but Bunzl said its pipeline remains active with a better outlook for 2026
Underlying revenue edged up a rather feeble 0.4%, but the pace picked up to 0.9% in the second half. Similarly, while operating margins slipped 0.6% to 7.7%, the drop moderated in the second half to 0.3%. Management cheered investors by pointing to improved trading in North America, stabilisation in Continental Europe, and margin expansion in the UK and Ireland. So the future looks that little bit brighter.
Start of the recovery
Cash conversion remained strong at 95%, evenn though free cash flow fell 8.7% to £579m. The board reiterated guidance for moderate revenue growth in FY26, albeit at slightly lower margins. A full-blown recovery will take time, but recent troubles leaves the shares looking terrific value on a price-to-earnings ratio of 10.3.
A stronger global economy would help, particularly in the US. So would greater clarity on tariffs. But while sector after sector frets about the AI threat, I struggle to see Bunzl’s bread-and-butter products being disrupted. This is a practical, down-to-earth business selling essentials companies will need for years. The shares are down almost 35% over 12 months and trade around levels last seen a decade ago, but they’ve rebounded 8.5% in the past month. Is this the start of something big?
For me, Bunzl remains one of the most compelling recovery stories on the FTSE 100 and well worth considering before it potentially climbs higher.
