Stocks in Focus: Bunzl


This week Oliver Phillips of NW Brown focuses on Bunzl.


Last week Bunzl announced its full year results for 2015, which showed organic revenue growth of 0.4% but overall revenue growth of 5%. Bunzl is a support services company that supplies non-food consumable products, such as disposable coffee cups and tableware for coffee shops, which are essential for the day-to-day running of their customers’ businesses.

Bunzl seeks to grow its business both organically, via increased sales and/or margins, as well as through acquisitions. Indeed, whilst Bunzl has had organic growth in excess of GDP in 9 of the last 11 years, a main component of the group’s long-term growth has come from reinvesting its strong cash flows into “bolt-on” acquisitions of small family businesses within its fragmented marketplace. Since 2004 the company has made 122 acquisitions and during 2015 the company spent £327m on 22 businesses in various geographies. By paying sensible prices for these businesses it is able to generate attractive returns through cost efficiencies and synergies.

Whilst the slowing organic growth figures could be a cause for concern, investors will be reassured by the strong acquisition-led growth that is expected to remain a core component of Bunzl’s long term strategy for many years to come. By becoming a successful acquirer and by maintaining steady margins the company has been able to grow profits over the long term and has grown its dividend for 23 consecutive years at an average rate of 10% a year.

Understanding a business and how it operates is often more important than the headline figures that are reported in any given year. A company such as Bunzl highlights the need for investors to look further than the headline numbers, and to delve into the long-term drivers of growth.

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A Cambridge and international trading company

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