Slimmed-down Bunzl shows signs of recovery

ANTHONY HABGOOD, the chief executive brought in to revive Bunzl, the paper and packaging distribution group, has scored a success with the group's first rise in profits and earnings for three years.

Pre-tax profits rose 8.5 per cent to pounds 21.7m for the six months to 30 June, and earnings increased 18.5 per cent to 3.2p.

Mr Habgood said: 'Bunzl has been in decline since 1988. We've now turned the corner but we have to work hard to sustain the recovery.'

Sales declined 11 per cent to pounds 619.2m, reflecting the disposals programme initiated by the new management brought in a year ago. The slimmed-down group's margins rose from 3.7 per cent to 4.4 per cent and gearing improved from 54.5 per cent to 47.8 per cent.

Mr Habgood warned that trading conditions remained very difficult in all the group's main markets: 'We're bumping along; I'm not terribly optimistic about the US or the UK.'

He added that the group still had room for improvement: 'Those business areas that remain weak are the subject of continuing attention.'

There were no exceptional or extraordinary costs charged to the profit and loss account, after Bunzl's pounds 30m provisions for disposals in 1991. The interim dividend is maintained at 1.8p. Mr Habgood said that despite the jump in earnings it would be imprudent to raise it, given the tough economic circumstances.

Jonathan Helliwell, analyst at James Capel, said: 'Bunzl has made real progress, especially considering market conditions are not in its favour.' He is forecasting pounds 43m for the full year, down pounds 2m on his earlier projection, because 'the weakness of the dollar will really hurt them in the second half'.

The shares closed up 2p at 89p.