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Bunzl shareholders suffered a double blow last week. In a trading update that came a week earlier than planned, the FTSE 100 distributor of workplace supplies cut its full-year outlook, citing weakness in North America, where it makes more than half its sales.
But what really rattled investors was its decision to pause a £200mn share buyback, having completed only £115mn. The move made Bunzl the first company in the blue-chip index to halt a buyback since 2020, spooking a market that has seen a growing number of companies repurchase their own shares in a bid to prop up valuations.
Bunzl’s share price crashed by more than 25 per cent on the day to a four-year low, wiping £2bn from the stock’s market value.
After riding a wave of higher prices and supply chain disruptions during the pandemic years, the distributor has latterly struggled to find growth beyond M&A. Its push to boost own-brand product sales in the US, particularly in its food service and grocery business, hasn’t worked well. Meanwhile, lower prices and softer demand are also weighing on organic growth.
The company still expects to spend about £700mn a year on acquisitions through to 2027, but underlying revenues are now forecast to stay broadly flat. Margins are also expected to shrink slightly this year, with management now guiding for a group operating margin of just under 8 per cent, down from 8.3 per cent in 2024.
Bunzl’s bosses are showing faith despite the sell-off. Chief executive Frank van Zanten and his associates bought £1.1mn worth of shares on April 16. Corporate development director Andrew Mooney and associates spent £118,159, while Alexia Howes, an associate of chief financial officer Richard Howes, purchased just under £200,000.