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Brammer on a roll in Europe

Investment Column
Brammer, the Altrincham-based distribution and rental group, is unusual for a British company with substantial overseas operations. Despite doing a third of its business abroad, it has no US or Far East subsidiaries, but concentrates instead on becoming a pan-European distributor in the single market.

It is a strategy that could leave Brammer exposed to the slowdown in large economies such as France or Germany as they whip themselves into shape for the arrival of a single European currency. But the evidence of the latest interim results suggests otherwise.

Pre-tax profits in the six months to June rose by 26 per cent to pounds 12.8m on sales 15 per cent higher at pounds 103m.

True, growth rates in the period have slowed from the 50 per cent seen last year as trading conditions have become more difficult. But Brammer is clearly gaining as it consolidates its leading position by rolling out its distribution network across Europe, where it provides nuts and bolts and bearings and drive belts for just-in-time delivery.

The most recent example of moves to reinforce the business came in April when Brammer bought the 75 per cent of a Spanish distributor it did not already own for pounds 10.5m. With pounds 3.1m of net cash on the balance sheet, more acquisitions should follow.

Brammer is the European leader in testing and computer equipment, a market with good growth prospects as blue-chip customers such as BT, Siemens and Nokia increasingly outsource their information technology services. This division, which accounts for a fifth of profits, was bolstered in July with the acquisition of Hamilton, which specialises in the short- term rental of computer equipment in the Benelux countries, for up to pounds 6.8m.

The shares have been strong performers this year, rising another 9.5p to 594.5p yesterday. "Clean" profits of pounds 26.6m this year would put them on a forward multiple of 15. That looks undemanding and suggests they have further to run.