THE INVESTMENT COLUMN: Bunzl's double act well received

When Anthony Habgood and David Williams took control at Bunzl in 1991, the rival paper groups Bowater (now Rexam) and Arjo Wiggins Appleton were sneezing and Bunzl was on the floor after a 1980s spending spree. After nearly five years of treatment by the duo, the roles have been reversed. Both the big groups are now suffering at the hands of the paper cycle, while Bunzl's distribution businesses have ridden out recent wild fluctuations in pulp (and plastics) prices.

Yesterday, the group announced pre-tax profits up a third to pounds 106m, right at the top of expecations, and was rewarded with an 8p rise in the share price to 209p.

The medicine administered by Messrs Habgood and Williams has been to dump around a third of the business and concentrate on four areas, ranging from paper and plastic plates and the like to protective plastic caps for engineering parts, where it has leading positions. As a result, the group has seen net margins rise from 4.3 per cent in 1992 to 6.1 per cent last year, when return on capital topped a highly respectable 20 per cent, even after taking account of goodwill on acquisitions.

The problem for management now is how to maintain the momentum of growth. Profits have risen at a faster rate than sales since 1992, showing compound growth of 25 per cent over that period, some eight points ahead of the expansion in the top line. But fatter margins will be harder to come by from here on. The building supplies business, the last of the remaining serious underperformers, went in mid-1994.

Mr Habgood is confident that growth can continue and points to new business won in the key US market so far this year. Contracts with Supervalu, a grocery distributor, will alone be worth in excess of $400m over four years. But to get things going, Bunzl may need to use its minimal 11 per cent gearing to buy something bigger than the pounds 3.7m of bolt-on acquisitions announced yesterday.

Despite a lowly forward rating of 12, based on profits of pounds 116m this year, the shares may mark time until there are signs of further action. Hold.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Recruitment Genius: Technical Report Writer

£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...

MBDA UK Ltd: Indirect Procurement Category Manager

Competitive salary & benefits!: MBDA UK Ltd: MBDA UK LTD Indirect Procurement...

Day In a Page

Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee
World War Z author Max Brooks honours WW1's Harlem Hellfighters in new graphic novel

Max Brooks honours Harlem Hellfighters

The author talks about race, legacy and his Will Smith film option to Tim Walker
Why the league system no longer measures up

League system no longer measures up

Jon Coles, former head of standards at the Department of Education, used to be in charge of school performance rankings. He explains how he would reform the system
Valentine's Day cards: 5 best online card shops

Don't leave it to the petrol station: The best online card shops for Valentine's Day

Can't find a card you like on the high street? Try one of these sites for individual, personalised options, whatever your taste