£242m Bunzl beats the bag drag

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The company today reported a sharp fall in operating profits in its UK operations, which account for about a quarter of its business. Profits growth of 17% in the first half of the year dwindled to 4% by the end of 2008.

The recession sparked a fall in demand for Bunzl's throwaway catering equipment, as corporates cut back workers' perks, and its disposable safety gear to a construction industry that has all but fallen silent.

Bunzl was also hit by Britain's embracing of green issues and the opprobrium with which plastic bags are now greeted by some.

"Single-use plastic bags are down 22% year on year," admitted chief executive Mike Roney, whose biggest supermarket customer is Asda. "We have offset that to an extent though by providing reusable bags, jute bags, biodegradable bags where the selling price is five times higher and the [profit] margins are higher."

Bunzl managed growth of 1% in the recession-hit US, where it does half its business.

Stronger performances in western Europe and elsewhere enabled the group to report underlying pre-tax profits up 5% at £242 million.The dividend for the year rises 10% to 20.6p