THE INVESTMENT COLUMN: Bunzl's double act well received
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.
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Weather bomb in pictures: Storms cuts power for tens of thousands – and snow is on the way
Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
Russell Brand was rendered speechless on Question Time by this man
Fury at Airbus after it hints the super-jumbo may be mothballed
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
Nigel Farage defends Kerry Smith 'ch***y' comment: 'If you are going for a Chinese, what do you say you’re going for?'
Nigel Farage's approval rating hits 'record low' as popularity suffers in wake of Ukip sex scandal
Pakistan school attack live: Taliban kill at least 132 children in 'horrifying' massacre
Sony hack: Angelina Jolie branded 'seriously out of her mind' in further embarrassing leaked email saga
Panic Saturday: 13 million Britons spend £1.2bn – while 13 million others across the country live in poverty unable to afford food
iJobs Money & Business
$200 - $350 per annum: Carlton Senior Appointments: Managing Producer Office...
$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...
Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...
Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...