Bunzl (LON:BNZL) reported a “challenging” 2025 as execution issues tied to a major organizational change in its largest business coincided with weaker end markets, driving a decline in adjusted operating profit and margin compression. Management said actions taken during the year helped improve performance in the second half, including a return to underlying revenue growth and a moderation in margin decline, and reiterated guidance for 2026 despite ongoing market uncertainty.
2025 results: modest revenue growth, lower profit and margin
At constant exchange rates, group revenue increased 3.0% in 2025. CFO Richard Howes said underlying revenue growth was 0.4% for the year, with improvement in the second half (0.9%) versus the first half (0.2%). Acquisitions contributed 3.3% to growth, partially offset by a 0.4% drag from the disposal of the R3 Safety business in the U.S.
Howes attributed margin pressure mainly to North America Distribution, where execution issues in a challenging end-market environment led to customer price pressure, alongside headwinds elsewhere in North America and in Brazil, and selling price pressure in France’s cleaning and hygiene business. While group gross margin was unchanged at 28.8%, he said underlying gross margin declined and was the primary driver of the operating margin reduction.
Operational issues and corrective actions in North America
Management highlighted North America Distribution—about 30% of group revenue—as the biggest operational challenge in 2025. The business moved to a sales and operations planning model that separated logistics and supply chain from sales. While intended to support national account growth, coordinated processes, and own-brand development, management said the initial rollout reduced agility of local teams, resulting in lost “wallet share” even as customers were retained.
In the first half of 2025, market weakness increased volume pressure and customer price sensitivity, amplifying execution problems. The company cited tariff-related supply chain disruption, weak U.S. consumer confidence, inflationary pressures in certain food products affecting restaurant and convenience store footfall, and ongoing cattle supply/demand challenges impacting food processors.
Management said it responded with leadership changes and tighter cost management from the second quarter, along with steps to restore local decision-making on pricing and inventory to improve agility. The company also emphasized improved service levels and stabilized inventory, strengthened relationships with preferred branded suppliers, and increased own-brand penetration with new category launches. These actions helped support more than $100 million of new business wins in the fourth quarter, spanning national grocery and food service customers.
Europe actions: tender focus, warehouse consolidation, and efficiency initiatives
In Continental Europe, Bunzl described a difficult environment since the second half of 2024, particularly in France, due to deflation, a weak economy, and operating cost inflation. Management said it enhanced monitoring of major tenders, strengthened cross-country collaboration, and more proactively promoted value-added services, including sustainability offerings. It reported winning EUR 50 million of new business in the second half of 2025 for customer relationships worth over EUR 100,000 per year.
The company also pointed to continued own-brand progress in Europe, with a 1% increase in own-brand penetration, and procurement benefits from consolidating purchases across operating companies. Operationally, Europe completed 10 warehouse consolidations and relocations in 2025, most of them in France, where a cleaning and hygiene project reduced warehouses from 15 to 6 and was “largely implemented.” Management said it expects net benefits in 2026, and noted labor optimization projects, limits on discretionary spending, and use of AI tools to improve efficiency.
Cash flow, capital allocation, and shareholder returns
Bunzl reported GBP 579 million of free cash flow, with cash conversion of 95%. Free cash flow was down 9% year-on-year due to lower adjusted operating profit, though the company said free cash flow improved in the second half as working capital management strengthened. The company completed a GBP 200 million share buyback in October and ended the year with adjusted net debt to EBITDA of 2.0x, at the lower end of its 2.0x to 2.5x target range.
Management reiterated its progressive dividend policy and announced a 0.3% increase in the total dividend, with dividend cover of 2.4x in 2025 (down from 2.6x in 2024). Combined with the buyback, Bunzl said it returned almost GBP 450 million to shareholders in 2025.
Acquisition spend was GBP 132 million in 2025, down from a record 2024, with eight acquisitions announced. Management said the pipeline remained active and emphasized continued consolidation opportunities, citing more than 1,300 potential targets identified across markets. It also reiterated a focus on bolt-on acquisitions and noted that average multiples paid have been around 8x operating profit over the last decade, targeting a 6x to 8x range depending on deal specifics.
2026 outlook: moderate growth, stable profit, and slightly lower margin
Howes said the outlook for 2026 was unchanged from guidance set out in December. The company expects moderate revenue growth, supported by some underlying revenue growth and a small benefit from announced acquisitions, with “slight volume growth” driven by improved performance and expected business wins in challenging markets and a broadly neutral selling price environment.
For costs, Bunzl expects operating cost inflation of around 2% to 3%, partially offset by efficiency and sourcing initiatives, including the annualization of Nisbets synergies. As a result, management expects operating margin to be “slightly down” year-on-year compared with 7.6% in 2025 (excluding the share-based payment credit), and said it anticipates a more normalized first-half/second-half profit weighting. The company also guided to a net finance charge of GBP 125 million and a tax rate of 26%.
In Q&A, management said early trading in January was consistent with guidance but cautioned that January is the lowest-profit month of the year and that fourth-quarter revenue momentum is often seasonal and not necessarily indicative of January trends. On pricing, management described a broadly stable outlook, with continued but moderating deflation in cleaning and hygiene, and noted tariff-related impacts and other uncertainties that were still being assessed.
About Bunzl (LON:BNZL)
Bunzl plc operates as a distribution and services company in the North America, Continental Europe, the United Kingdom, Ireland, and internationally. The company offers food packaging, films, labels, cleaning and hygiene supplies, and personal protection equipment to grocery stores, supermarkets, and convenience stores. It also provides food packaging, disposable tableware, guest amenities, catering equipment, agricultural supplies, cleaning and hygiene products, and safety items to hotels, restaurants, contract caterers, food processors, commercial growers, and the leisure sector; and gloves, boots, hard hats, ear and eye protection, and other workwear, as well as cleaning and hygiene supplies, and asset protection products to industrial and construction, and ecommerce sectors.
