International business supplies distributor Bunzl (BUNZ) has shown that operating in a mundane part of the market is no bad thing. Its shares tick up by 3.6% to £23.93 as the company announces revenues are expected to have increased by 7% in the first half to 30 June, due to improved underlying growth and a boost from its latest acquisitions.
Not bad for a company involved in the not too glamorous world of supplying businesses, hospitals and schools with items ranging from coffee cup holders to toilet paper among other essentials.
‘It might not be as exciting as picking an oil explorer or junior miner .... but investing is about keeping your money safe as much as it is making a return on it and today’s first-half trading update from Bunzl shows that the best long-term picks can be the dull ones,’ says Russ Mould, investment director at AJ Bell.
Mould also points out that dependable Bunzl is one of only 27 FTSE 100 companies to have raised its dividend for 10 years consecutively.
Acquisition trail
Bunzl has been busy on the acquisitions front, having notched up eight acquisitions so far this year. CEO Frank van Zanten expects Bunzl 'to complete further acquisitions as the year progresses’, the FTSE 100 powerhouse seeing a promising pipeline of takeover targets.
The most recent acquisitions include two businesses in Canada, AMFAS and Western Safety. These companies distribute commercial and industrial first aid supplies and together have annualised revenue of around C$16m.
Bunzl has also acquired Valencia-based Technopacking to bolster its Spanish operations, which are now bringing in yearly sales of around €200m.
Analysts' view
Bunzl seems well favoured by those in the know. Rajeesh Kumar, an analyst at HSBC, has raised his price target from £24 to £25.08. He says the company’s ‘remuneration structures.... are actively designed, and managed, to remove as much of the vulgarity of volatility of profit as possible’.
Paul Checketts, an analyst at Barclays, likes Bunzl’s inherent defensiveness and says that new contact wins ‘will support growth in the US and UK, where the outlook is more uncertain’. His £26 price target implies the best part of 9% upside.
