Bunzl PLC (LSE:BNZL)'s first-half results have been well received after the distribution firm raised annual guidance and announced two more bolt-on acquisitions.
Analysts at Stifel view it "as a good update from Bunzl and see the group as well positioned to continue to consolidate its fragmented end-markets with further opportunity to expand margins".
The broker noted adjusted operating profit was £438.3 million, an increase of 2.5%, and margins increased to 7.4% from 7.3% in the prior period, supported by successful margin management initiatives, including the increase in own brand penetration.
Regional performance was mixed, Stifel pointed out, with North America weakness continuing, with underlying revenue down 3.1%, driven by volume weakness in the foodservice sector.
Inflation continues to drive good underlying revenue growth in Continental Europe with underlying revenue up 3.7%, while similarly, the UK & Ireland saw strong revenue growth driven by inflation, with underlying revenue up 11.6%.
Stifel noted the impact of operating cost inflation reduced and was moderate over the period.
Retaining a 'hold' rating, the broker said in the near term, "we see scope for the softer macroeconomic backdrop, potential price moderation and an FX translational headwind to put some downward pressure on revenue and EPS progression".
Shore Capital analyst Robin Speakman reiterated a 'buy' rating.
"We observe at Bunzl that a conservative management team continues to deliver good performance, the group remains a resilient steady cash generative business model, underlying growth is set to continue," he said.
Speakman believes M&A remains central to the business case, and with leverage of 1.1x this provides "significant headroom".
"Should leverage remain well below target with the group unable to deploy cash on M&A well ahead of strong fee cash flow, then we see scope for buybacks," he said.
"Given substantial firepower in the balance sheet, we expect the acquisition pipeline to continue to convert through the remainder of H2.
"Bunzl offers strong value and investment credentials in our view, in an environment which remains positive overall for underlying organic and acquisitive growth," Speakman added.