Under chairman Anthony Habgood, Bunzl has focused on what it knows best, namely making packaging for supermarkets and supplying plastic caps and plugs. Bunzl has expanded rapidly by buying wisely and its paper operation, traditionally a volatile business, has wisely been slimmed down.
Analysts estimate that Bunzl showed organic growth of 8 per cent last year, no mean feat for a manufacturer and distributor, by picking up share from competitors. This sort of heady growth rate will be difficult to sustain, however it should still be able to expand its existing business by at least 6 per cent a year. And there are plenty of acquisition possibilities, especially in Europe where its chosen markets remain fragmented.
Bunzl is still vulnerable to the vagaries of the paper price but has proved among the best in the industry at coping with its peaks and troughs.
Bunzl's shares have risen by almost 30 per cent over the last few months, helped by a resurgence in the value of second liners as fund managers search for value outside the FTSE 100. And the strong results saw the stock rise another 13.5p to 287p yesterday.
Panmure Gordon has upgraded current-year profit forecasts by pounds 7m to pounds 133m, and by pounds 5m to pounds 145m in 1999, putting the shares on a prospective p/e ratio of 15, falling to 14. Bunzl is still sitting on an undeserved 20 per cent discount to the market, even after its recent re-rating. Good value.