Bunzl has increased its adjusted operating guidance, driven by improved margin performance and acquisitions, as its share value reached a record high.

The distribution firm that its operating profit increased by 3.9% year-on-year to £455.5m in the six months to 30 June, while its profit before income tax jumped by 3.3% to £408.7m.

Although revenue at the company has fallen by 0.4% to £5.7bn, Bunzl said that underlying revenue trends were improving in the second quarter, with further improvement in July and August.

In this time, its interim dividend increased by 10.4% to 20.1 pence per share.

Chief executive officer at Bunzl, Frank van Zanten, said: "We have significantly increased the group's operating margin in recent years to 8%, driven by good margin management, including increased own brand penetration, and the impact of recently acquired businesses. In 2024, our committed acquisition spend is already at a record high of over £650m.

"Consistent strong performance means Bunzl has generated around £2.9bn of free cash flow between 2019 and 2023, significantly strengthening our balance sheet. Despite a material increase in the amount of capital we have allocated towards self-funding value-accretive acquisitions, our consistently strong cash generation means that leverage has remained below our target range for some time. Our acquisition pipeline remains active and our runway of opportunity is substantial."

Bunzl said that it was committed to allocating £700m per annum primarily towards value-accretive acquisitions, and if required, return of capital in each of the three years ending 31 December 2027.

Furthermore, it recognised its “strong balance sheet” by announcing an initial £250m share buyback scheme that has begun immediately, and will complete by 3 March 2025. It added that it will then commence a further share buyback at its 2024 preliminary results, of £200m.

Investment director at AJ Bell, Russ Mould, added: "Bunzl’s underlying business model remains very solid. Bunzl supplies the things that other firms need in order to do business, but not items they would sell to their customers. The required nature of the products it provides may shelter the firm from the vagaries of the economic cycle, at least to some degree, and also provide Bunzl with pricing power, a key ingredient during inflationary times.

"Bunzl is generating sufficient cash that it is now even launching its first major share buyback operation, so it can return further liquidity to its investors, rather than merely cover stock option issuance."

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