UPDATE: Bunzl To Continue Buying Spree As Profits Rise

U.K.-based distribution and outsourcing group Bunzl PLC (BNZL.LN) Tuesday said it expects higher profits in the second half, boosted by acquisitions, after reporting an 8% increase in first-half pretax profit.

Chief Executive Michael Roney said "good growth in profitability and the resumption of acquisition activity gives us a platform and momentum for further growth."

The company, which has made eight acquisitions so far this year including two announced on Tuesday, spending some GBP100 million, said the expected boost to revenue will come through in the second half of the year.

For the first half to June 30, Bunzl booked a 2% increase in revenue to GBP2.34 billion. Only half of that was due to acquisitions made last year, with the remainder coming from organic growth.

But as the buys are integrated into the business and further acquisitions are made, the impact on revenue will show, CEO Roney told Dow Jones Newswires in an interview.

"It's a question of who wants to sell...there are lots of places we are looking at," he said adding that he would particularly want to expand in Brazil, where there is a lot of growth potential and further in continental Europe, which is underrepresented.

Roney also wants to enter the Scandinavian markets, outside of Denmark, as well as Portugal and Austria. Bunzl on average spends GBP127 million on acquisitions but the CEO said he could comfortably lift this to GBP150-160 million if the right opportunity is found.

JP Morgan analyst Robert Plant said that the business momentum "looks positive, especially if Bunzl can maintain its pace of acquisitions."

At 0755 GMT, Bunzl shares were up 7 pence or 0.9% to 709 pence in a broadly lower London market.

Bunzl, based in London, provides outsourcing and distribution for the grocery, food service, cleaning and safety, nonfood retail and health care sectors. It supplies a broad range of nonfood consumable products like catering equipment and vending machines, as well as running distribution centers and delivery networks.

Faced with a global recession, Bunzl started cost cutting two years ago, resulting in the loss of 1400 jobs. It's now reaping the benefits and plans further small cost cuts.

This, combined with price increases and an improved product mix, led to an 8% increase in first-half pretax profit, before intangible amortization and acquisition related costs, to GBP125.1 million, as well as an increase in margin to 6% from 5.8% a year ago. Roney expects margins to hover around this level, rising or falling 10 basis points.

Bunzl also reported underlying revenue growth of 5% in its largest business area, North America, and said that group operating margin improved due to significant increases in the U.K. & Ireland and the Rest of the World.

The company lifted its interim dividend by 8% to 7.15 pence per share.

Bunzl shares closed Friday at 702 pence, giving it a market value of GBP2.3 billion.

By Anita Likus, Dow Jones Newswires; +44 20 7842 9407; anita.likus@dowjones.com

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