Bunzl PLC (LON:BNZL) shares rose on Monday as the distribution firm said its trading performance for the first half of 2020 had been “better than expected” despite the coronavirus pandemic.
In a trading update for the period ending June 30, the FTSE 100 firm said its revenue growth for the period was expected to be “particularly strong” in both its continental Europe and Rest of the World segments as “significant sales volumes” of coronavirus-related products as well as strong performances in its higher margin cleaning & hygiene and healthcare sectors offset “substantial declines in profitability” in the grocery and foodservice sectors.
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The company’s North America and UK & Ireland segments are also expected to see “slight increases in revenue”.
As a result, Bunzl said it expects revenues in the period to increase by around 6%, while its operating margin is expected to be “modestly higher” than the year-ago period.
However, the company said due to the uncertainty presented by the coronavirus it remained “cautious” about its outlook for the rest of the year, particularly as the strong demand for coronavirus products was not expected to be repeated in the second half.
Bunzl’s chief executive Frank van Zanten said sectors such as retail and foodservice were “expected to be affected by reduced, albeit improving, demand”, while the grocery, cleaning & hygiene and healthcare sectors were expected to “deliver a resilient performance, with a potentially mixed trading performance from the safety sector”.
Zanten also said the firm had “substantial funding headroom available with strong cashflows and a robust balance sheet”.
In a note on Monday, analysts at Shore Capital retained their ‘buy’ rating on the firm, saying Bunzl was “once again demonstrating the strength of its business model” and they expected to upgrade their full year expectations.
“Bunzl is a strong business in our view, this morning demonstrating the unerring qualities of its business model for investors”, the broker said.
Shares in the company rose 5.4% to 1,985p in early trading.