High street squeeze hits Bunzl

Bunzl, which specialises in "not for resale" items such as packaging and checkout displays for retailers, said UK sales were down 5 per cent in a "tough" trading climate despite profits being boosted by earlier cost-cutting moves.

The company was also hit by the continued weakness of the construction industry and a spending clampdown by healthcare customers, which buy products such as bandages and facemasks.

But the firm enjoyed far better fortunes in North America - its biggest market - where sales rose 5 per cent.

Bunzl is also on the lookout for more acquisitions after taking another step into the fast-growing Brazilian market, bringing its total number of deals so far this year to eight.

Bunzl's healthcare business in the UK has also suffered in comparison with a surge in demand for its products a year earlier following the swine flu outbreak. Corporate customers are meanwhile cutting back spending on snack and vending machines.

But trends in better performing markets - notably in North America where consumers are choosing to eat more meals at home - helped revenues across the overall group edge 2 per cent higher to 2.35bn, with pre-tax profits 6 per cent ahead at 100m.

Chief executive Michael Roney expects the underlying growth in North America to continue, albeit held back by lingering economic woes in the UK and Ireland and a "sluggish" performance in continental Europe.

He said the group's return to deal-making would give Bunzl "a platform and momentum for further growth" despite the fragile recovery.

The cash-rich firm has a war-chest of more than 500 million in undrawn banking facilities to snap up businesses if needed.