Bunzl PLC (LON:BNZL) has cancelled its final dividend and stopped all discretionary spending to navigate through the coronavirus pandemic, as the distributor has been designated a critical part of the supply chain by governments around the world.
However, distribution to the foodservice and retail sectors, which makes up 35% of group revenues, is expected to be significantly affected by coronavirus lockdowns in most countries.
Foodservice and retail sectors saw an “increasingly negative” impact on revenues in the latter part of March, as more governments restricted the movement of citizens and ordered restaurants and bars to be shuttered.
In the other parts of the business, cleaning & hygiene and safety sectors are expected to see a “mixed trading picture” in coming months, while grocery and healthcare sectors are expected to be robust.
In the first quarter of the year, revenues increased 4.5%, with underlying growth picking up to 3% from the 0.5-1% declines in the second half of 2019 and continued growth from acquisitions.
But the FTSE 100 group said the unprecedented uncertainly around the pandemic meant it was not possible to give guidance for the rest of the year.
Net debt stood at £1.25bn at the end of last year, with a net debt to EBITDA ratio of 1.9 times, plus around £600mln of headroom in its committed borrowing facilities.
With management taking a 20% reduction in fees and salary for the coming quarter, as well as managing the cost base, stopping all discretionary spending and M&A activity, including deferring the completion of a recently-announced transaction, the board said it “intends to consider the appropriateness, quantum and timing” of an extra interim dividend for 2019 when the impact of the pandemic is clearer.
Bunzl shares fell more than 1% to 1,544p by noon on Thursday, where they are down 26% since the start of the year.
--Adds share price--