Global business supplies distributer Bunzl (BNZL) continues to chug along nicely. Committed to its buy and build strategy, the company reported first half results that show a 4% rise in adjusted pre-tax profits to £257.9m, while revenue beat market forecasts by a percentage point with a 5% improvement on the prior year at £4.34bn.
The company may be anything but a sexy stock yet it has built a huge fan base among investors because of its consistency. Bunzl provides day-to-day necessities that people and organisations rely on, from toilet paper to disposable coffee cups, office supplies to washroom products.
Acquisitions have always played an important role for Bunzl so today's purchase of Enor, a Norwegian supplier of catering equipment will shock few. Bunzl has not revealed the asking price but investors are told Enor reported approximately £27m of sales in 2017.
Little bolt-on deals such as this carry less risk than large acquisitions, while also feeding the revenue line. That;s important since Bunzl operating profit margin are pretty think, unchanged in the period at 6.6%.
Having started the day in strong demand (Bunzl was temporarily the FTSE 100's biggest riser), the stock has since drifted, down 1p at £23.29 as of 11am.
GLOBAL GROWTH
Global exposure is something investors have got used to from Bunzl, it makes the majority of its sales overseas, with around 77% coming from North America and Continental Europe.
The downside of this is that the company is exposed to currency movements. This is illustrated by the company's 10% increase in adjusted pre-tax profits if we assume constant currencies.
Continental Europe was the outstanding performer, with operating profits up 22% to £89.2m year-on-year driven by acquisitions. North America only managed to grow profits by 3% to 140.1m although this was mainly organic growth.
Bunzl has a solid history of dividend growth and has not disappointed with a 9% increase in the interim dividend to 15.2 pence.
Robin Speakman, analyst at broker Shore Capital, says ‘prospects for further growth and development through the second half period and into the full year 2019 are indicated to remain positive with acquisitive activity continuing to plan, leveraging strong cash generation’.
