Bunzl raises payout after rise in profits: First increase in four years as group overcomes difficult trading conditions

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The Independent Online
BUNZL, the paper and plastics distribution group, has increased its dividend for the first time in four years after reporting a 1993 pre-tax profit up 38 per cent at pounds 55.8m, despite continuing difficult business conditions in its main markets.

Bunzl's chief executive, Anthony Habgood, says the company managed to increase its sales and profits against a trend of flat or lower margins in some key divisions.

Operating profit in paper and plastic disposables, its largest division, rose by 27 per cent to pounds 40.6m on sales that were up 28 per cent at pounds 724m, although average prices in its key US market slipped by 2 per cent. Overall, group sales were up 16 per cent at pounds 1.52bn.

Bunzl's shares ended 2p higher at 181p. A modest 2.5 per cent dividend increase to 4.1p for the year reflects the company's continued cautious strategy.

Mr Habgood, who took over as chief executive almost three years ago after a misjudged acquisition binge led to a shareholders' coup, said: 'We want to reward shareholders, but you've got to have some balance.' As one of his first moves on taking Bunzl's reins was to cut the dividend, the increase is seen as a sign that the worst of the retrenchment is over.

'They were trying to give a signal and it worked,' said Tim Rothwell, who follows Bunzl for BZW Securities. He has increased his forecast for 1994 pre-tax earnings to pounds 67m from pounds 63m.

Bunzl's renewed confidence was also underlined by its move back on to the acquisition trail in 1993.

Goodman Paper in the US and Automatic Catering Supplies in Britain - the company's first move into Europe in paper and plastic disposables - contributed a net pounds 1m to operating profits. Bunzl expects that contribution to rise. In the past month Bunzl bought two more US companies - Ziff Paper and MSI, which makes plastic fittings for the oil and gas industry.

The company plays its cards close to its chest on future acquisition plans, but there is market speculation in the UK over Autobar, a business similar to ACS and owned by the Kuwait Investment Office.

Divisions such as disposable products and specialty cigarette filters are showing healthy returns, but Bunzl's other units are still struggling. Margins for fine paper, used in glossy brochures, halved last year.

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