Bunzl profit beats on acquisitions; margin pressures continue

(Reuters) - Bunzl Plc’s full-year profit beat expectations on Monday as the British business supplies distributor reaped the benefits of small acquisitions and a growing clientele, but the company’s margins continued to be pressured by increasing costs.

Bunzl is known for making small acquisitions aimed at growing specific parts of its business and under Chief Executive Officer Frank van Zanten the company made a record number of deals in 2017.

The company has made over 150 acquisitions since 2004.

Bunzl has been boosted by growth at its North America unit, which accounts for nearly 60 percent of overall revenue. Sales from the region grew 8 percent to 5.28 billion pounds ($6.90 billion) at constant currency for the 12 months ended Dec 31 2018.

However, rising costs have pressured the company’s margins. Operating margins for the full year fell to their lowest in at least five years to 6.8 percent.

“We continue to face inflationary pressures on operating costs but these will be mitigated by our recently implemented, more focused and streamlined organization structure,” the company said.

Bunzl’s full-year revenue of 9.08 billion pounds was also driven by a 12 percent growth at its European business that excludes UK and Ireland.

The company said its ability to serve customers is “unlikely to be affected materially” due to Britain’s impending exit from the European Union. Bunzl makes more than 85 percent of revenue, profit and cash flow from outside the UK.

The company reported an adjusted profit before income tax of 559 million pounds, beating estimates of 553.6 million pounds, according to a company-provided consensus.

Bunzl also said on Monday it had acquired U.S.-based Liberty Glove & Safety, a company that makes personal protection equipment, for an undisclosed sum.

($1 = 0.7657 pounds)

Reporting by Pushkala Aripaka in Bengaluru; Editing by Shounak Dasgupta