It was a bad day for obscure British companies starting with the letter B and containing an exotic consonant and only one vowel. Investors in Bunzl may have whistled as the shares tanked by 6 per cent but would have been relieved that they hadn’t plumped for shares in Blinkx instead, because that stock plunged by 17 per cent.
In Bunzl’s case, the stock was dragged down by the market after its interim results proved as solid as ever. The company, which sells and distributes hairnets, teabags, industrial wipes, latex gloves, safety goggles and much else, said that sales grew by 7 per cent in the first half to £3.1 billion, while its pre-tax profit jumped by 11 per cent to £147.1 million on a statutory basis. The interim dividend rose by 7 per cent, which would be no surprise for long-term investors, given the payout has risen for 22 years running.
Organic growth was a relatively tepid 1 per cent because of a subdued performance in North America, where the loss of a big office supply customer and lower resin prices hit sales. The company expects to turn that around in the second half.
The growth was driven by acquisitions, Bunzl’s forte. The company has a shopping list of 500 companies. Imagine the size of the Rolodex on the desk of Mike Roney, the chief executive. Those are small family-owned companies that Bunzl will tap up and wait to buy. It sometimes takes a fight over succession plans, a large divorce settlement or a downturn for its targets to succumb, but the beauty for Bunzl is that it has a clear field. It is the only global consolidator of these types of businesses, so it can afford to be patient.
Bunzl added four new companies yesterday and has spent £241 million on deals this year. It has bought itself toeholds in Turkey and Austria for the first time and will bolt on companies there.
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Bunzl is a “consistent compounder”, and the steady drumbeat of acquisitions has ensured a continuing increase of revenues. It is similar to WPP, the huge advertiser, in that respect and is likewise one of the FTSE 100’s most consistent performers in terms of earnings stability and dividend accretion.
It trades at about 20 times earnings projections — steep for the sector — but you pay a premium for this sort of consistent delivery.
Revenue £3.1bn
Dividend 11.75p
MY ADVICE Buy for income
WHY The shares may have dipped but Bunzl remains
a consistent play with no obvious global competitor. Takeovers will add growth
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Amlin is one of only five listed Lloyd’s of London insurers left in a market that has been consolidating gradually for more than a decade.
The merger activity in the sector has accelerated in the past two years as underwriters have sought safety in scale amid falling premium rates and diminishing investment returns.
The urge to merge has also been fuelled by the expected increase in worldwide demand for commercial insurance and the growth of products tied to capital markets, from catastrophe bonds to insurance-linked securities.
With the prospect of a predator swooping an ever-present possibility, that means Amlin will always be enticing.
As a business in its own right, however, it is also of interest. About half of Amlin’s exposure is to reinsurance, or buying the riskiest parts of policies already written by another underwriter. It is highly profitable but when the claims come they can be debilitatingly huge. Only 18 per cent of Amlin’s exposure here is to catastrophe risk, where the payouts tend to be the biggest.
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The rest of its book is a diverse set of exposures to property and casualty, and marine and aviation insurance.
Amlin’s performance over the half-year was creditable: pre-tax profit a fraction lower at £143.3 million (absent an accounting change they would have been considerably higher) on gross written premiums up 6.2 per cent at £2 billion.
With a yield of more than 6 per cent, though, the shares are worth owning for the income alone.
Profit £143m
Dividend 8.4p
MY ADVICE Hold for income
WHY Attractive dividend yield and special payouts possible
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Some may have called time on the pub sector but not NewRiver Retail, the AIM-quoted Reit. It has snapped up 158 pubs from Punch Taverns in England and Wales for £53.5 million at a 13.6 per cent yield. This is NewRiver’s second pub portfolio after it bought 202 from Marston’s at the end of 2013.
NewRiver floated in 2009 and was valued at £25 million but has grown to more than £600 million. The company is planning for some of the pubs, which will be run by a third-party manager, to be made mixed use with a convenience store or a post office placed nearby. That way, pubgoers can also pick up a pint of milk and stamps at the same time as a gin and tonic.
This may not be its last spending spree. It has its fingers in lots of pies, or pints in this case, and not just pubs. The core business is predominantly regional shopping centres. Last month it made three acquisitions, using up a large proportion of the £150 million of equity it raised in June.
Kate Renn, an analyst at Peel Hunt, believes that £50 million of firepower is available, should further acquisitions opportunities arise. More of the pub companies may start dusting off the bars at this rate.
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Profit £39.5m
Dividend 17p
MY ADVICE Buy
WHY Should benefit from increased occupier demand
And finally . . .
Did Bruce Wayne ever suffer from forex woes? BATM, known colloquially by traders as Batman, certainly has, as the depreciation of the Romanian leu and the Moldavian leu hit its first-half results. Best known for its tech-boom telecoms business, BATM now derives more than half of its sales from biomedical services in far-flung European countries. The company maintained full-year profit guidance but the shares abseiled 10 per cent lower. Holy smokes, Batman . . . as one sidekick might jest.