Bunzl has reaffirmed its financial objectives for 2025, despite experiencing a notable decrease in profit and revenue year-over-year, primarily influenced by price deflation within North America that has impacted its foodservice and grocery sectors. The British distribution and outsourcing group saw its shares plummet nearly 7% early on Monday following the announcement.
The company maintains an optimistic outlook, expecting 'robust' revenue growth at constant exchange rates in 2025, with operational margins anticipated to be consistent with the previous year. Projected net finance expenses are estimated to reach about 115 million pounds sterling. In the results reported for 2024, Bunzl recorded an attributable profit of 500.4 million pounds, a decline from 526.2 million pounds the previous year.
Revenue also saw a slight drop to 11.78 billion pounds from 11.80 billion pounds, a downturn largely attributed to weaknesses within North America, which accounts for more than half of Bunzl's total sales. The underlying revenue in this region fell by 2.6% to 6.57 billion pounds, significantly affected by deflation impacting its foodservice and grocery operations.
The volumes experienced adverse effects due to decreases in the foodservice redistribution and U.S. retail sectors. The group's profitability faced additional pressures from a 5.8 million-pound rise in tax charges at constant exchange rates, alongside a 10.9 million-pound hit stemming from hyperinflation accounting adjustments.
Moreover, higher net finance expenses totaling 103.2 million pounds were largely driven by lease interest expense, elevated interest rates, and a heightened average debt throughout the year. Despite these earnings setbacks, 2024 emerged as a 'record' year for acquisitions, with the company committing to 883 million pounds across 13 deals that span various industries and regions.
After completing the first 50 million-pound tranche of its share buyback program, Bunzl now intends to purchase an additional 150 million pounds of shares by the conclusion of 2025. Chief Executive Officer Frank van Zanten remarked, '2024 has been a year of significant strategic progress for Bunzl in which our dedicated and entrepreneurial teams delivered strong adjusted operating profit growth, supported by further expansion in our operating margin.
We have substantial headroom for continuing to self-fund value-accretive acquisitions alongside additional returns of capital to shareholders, and our acquisition pipeline remains active.' Analysts from RBC Capital Markets indicate little reason to adjust Bunzl's forecasts post-2024 results, yet foresee potential growth in earnings per share, driven by the company's proactive acquisition strategy.
They note, 'BNZL has also made substantial organic margin advances over the past five years, concentrating on increasing own-brand penetration (currently around 27%), enhanced purchasing practices, operational efficiencies, and a strategic shift from cost-plus contracts towards value-added solutions - we believe there is more growth potential here, a potential area for earnings upside.'.