THE INVESTMENT COLUMN
Edited by Andrew Dewson
Our view: Buy
Current price: 662p (-22.5p)
Punters looking for a stock to make them rich overnight probably haven't spent much time considering Bunzl - not surprising since the company has been around since the mid-19th century without ever having done much to encourage short-term investment. But for longer- term investors, Bunzl pushes the right buttons and yesterday's first- half results showed more steady progress.
The market focused on the negative impact the weak dollar had on the numbers, but why that should have come as a surprise is anyone's guess - the dollar has been weak for a long time and Bunzl does almost 60 per cent of its business in North America. In the circumstances, a 6.6 per cent rise in operating profits to 111.7m on the back of a 7.6 per cent rise in revenue to 1.73bn is a creditable performance and was ahead of most market forecasts.
Bunzl is still best known for its paper and packaging business (the company was the first commercial producer of cigarette filter papers), but the last of that was sold off in 2002 and it now concentrates on distribution and outsourcing for a wide range of industries. It supplies everything from plastic bags and food packaging for the food retail industry, cleaning and safety products, catering equipment and janitorial supplies. It is an international business with operations across Europe, Australasia and North America with long-term contracts supplying blue-chip customers.
The weak dollar was offset by stronger than expected performance in the UK and Ireland and the handful of bolt-on acquisitions the company has made in the past two years, the most recent being King Benelux, a Dutch distributor of healthcare and catering products, appear to be performing in line with management expectations. According to the company, there are plenty more potential acquisitions in the pipeline.
Although the shares are not exactly cheap, trading on approximately 14.1 times forecast 2008 earnings, Bunzl's management has an excellent track record of delivering on its promises and effectively integrating and improving margins via acquisitions. Bunzl is a low-risk, well-managed company that should find a place in any long-term growth equity portfolio. Buy.
Our view: Hold
Current price: 45p (-0.25p)
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