Bunzl Share News (BNZL)

(Sharecast News) - Distribution group Bunzl reinstated its dividend as it reported better-than-expected interim profits on the back of strong demand for personal protective equipment during the Covid-19 pandemic, but warned of a tougher second half ahead.
The company on Monday reported a 16.6% rise in adjusted pre-tax profits to £306.8m on revenue growth of 6.7% to £4.85bn. Analysts had forecast £296m and £4.8bn respectively.

Bunzl, which scrapped payouts in April, reinstated its 2019 dividend of 35.8p a share as an extra interim dividend for 2019 and declared an interim 2020 dividend of 15.8p a share.

The company also announced that it had entered into deals to buy MCR Safety, a U.S.-based personal protection equipment business, and Abco Kovex, a packaging distributor in Ireland.

At the height of coronavirus-led lockdowns in April, the company benefited from rising demand from grocery, healthcare as well as cleaning & hygiene sectors. However, the food service and retail sectors, which account for around 35% of its business, had been severely hit since March.

The boost was primarily driven by "significant sales volumes of Covid-19 related products including masks, sanitisers, gloves, disinfectants, coveralls, disposables wipes, face shields and eye protection", Bunzl said.

"Looking forward, although there remains considerable uncertainty, we expect to face challenging trading conditions during the second half of the year," said chief executive officer Frank van Zanten.

Analysts at Shore Capital retained a 'buy' rating on Bunzl shares, saying they believed the company was "a quality operation all round, driven by a strong client service culture with capital allocation and capital returns driving management".

"We feel that with opportunity for growth remaining, with a stable organic platform, the shares deserve a premium rating. The company is one of a minority of 'Large Caps' to increase its dividend in the current difficult Covid-dominated period."