This week I am looking at international distribution support services group, Bunzl, which supplies and distributes a wide range of workplace essentials to businesses.
Following many years of solid growth and a 26-year record of progressive dividends, Bunzl has built a credible “buy-and-hold” reputation amongst long term investors over the past two decades. The company has accomplished these notable returns through a combination of organic growth and successful bolt-on acquisitions. About three quarters of recent growth has come via Bunzl's self-funded acquisition strategy, with 157 purchases completed from 2004 to 2018 for a total spend of over £3 billion. Shares reached an all time high of £25.51 per share in April of this year, however fast-forward 5 months and the share price is down by almost a fifth due to the impact of the continued mixed macroeconomic and market conditions across the countries and sectors in which the group operates.
In a trading statement last week, Bunzl guided that slow revenue growth will persist for the rest of the year mainly on the back of tough trading conditions. Specifically, price deflation in the grocery sector in North America, a region which accounts for a little over half of total revenue.
A gloomy outlook perhaps, but Bunzl is famed for its resilience in tough market conditions and management seem optimistic about the pipeline of acquisitions going forward. Further progress may depend on a pick up in the pace of acquisitions as the company looks to revive its previous drive to consolidate the fragmented marketplace in which it operates. A company such as Bunzl highlights the need for investors to look further than the headline numbers, and to delve into the long-term drivers of growth.