Bunzl: The group supplies
everything from point of sales material in shops, to gowns for hospital
workers, across 27 countries. The group tends to grow revenue slightly faster
than GDP as it bolts on small-ish acquisitions on a very regular basis. So far
this year alone they have acquired 12 businesses for £119m adding just over £140m
of turnover. In these interim results to 30th June 2014, revenue was
up 7% at constant exchange rates, with group operating margins picking up from
6.4% to 6.7%. So, pre-tax profits were up 14% as were earnings per share at
39.0p, with the dividend being raised 10% to 11.0p. On translation there was a
headwind to profits of 8%-9%, due mainly to sterling’s strength over the
period. Cash conversion was good at 102% and net debt to EBITDA was a
comfortable 1.9x. Consensus forecasts
for this year are around 82p with 86.5p for 2015, being PEs (@1640p) of 20x
dropping to 18.9x. If the final dividend is raised 10%, the total for the year
will be 35.6p, a yield of just under 2.2%, covered 2.3x. Bunzl is a very sound
have and hold stock, but these valuations are getting stretched and it might be
well worth waiting for better buying opportunities. (27th August 2014)
These comments are not a personal recommendation to deal. Any
investments can fall as well as rise in value, so you could get back less than
you invest. I may have a financial interest in some of the stocks written
about. www.dividendpower.co.uk
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