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Panmure Gordon has trimmed its target price for distribution and outsourcing group Bunzl following the company's poorly-received pre-close trading update on Wednesday morning. "We adjust our FY expectations marginally for foreign exchange, though we believe the shares remain a 'hold' and Bunzl one of the more consistent performers out there." The target price is cut from 1,051p to 1,023p.
Positive Points: Including the two new acquisitions which it announced in conjunction with the update, Bunzl has announced nine acquisitions year to date with annualised revenue of approximately £210 million. Two new acquisitions were announced, McCordick Glove & Safety of Canada, a distributor of gloves and other personal protection equipment to a variety of industrial and retail customers, and Atlas Health Care Pty Limited of Australia, a supplier of medical consumables to the healthcare sector. The board highlighted that "the current environment for acquisitions remains positive." Trading had remained consistent with management’s expectations at the time of its third quarter October update. Both geographical and customer industry diversification are enjoyed. Management highlighted both strong cash flow and a strong balance sheet. The group has recently refinanced some of its debt facilities. A progressive dividend policy continues to be pursued. The half year payment was increased by 9%.
Negative Points: Management has highlighted "a challenging comparative in the second half due to a particularly strong performance in North America last year." Just over half of the group's revenues are generated in North America. Economic uncertainty persists, with the so called 'fiscal cliff' still casting a shadow. Bunzl remains sensitive to currency fluctuations, particularly the US dollar. Acquisitions always bring an element of risk.
Financial Highlights: Revenue growth for the year is expected to be approximately 6% on a constant currency basis Excluding acquisitions, underlying revenue growth is forecast at around 2.5%
Acquisitions/trading update: Management used the opportunity to underline the importance of acquisitions to its growth strategy. Including the two new acquisitions which it announced in conjunction with the update, Bunzl has announced nine acquisitions year to date with annualised revenue of approximately £210 million. As for trading over the full year, it had remained consistent with management's expectations at the time of its third quarter October update. Including acquisitions and on a constant currency basis, revenue growth of approximately 6% is forecast. Excluding acquisitions, underlying revenue growth is expected by management to be about 2.5%. The board highlighted a challenging comparative in the second half due to a particularly strong performance in North America last year. The share price declined by over 3% in early trading. On balance, the group's strong cash flow and balance sheet currently weigh against some concerns for slowing growth and tough comparatives
BUNZL PRE CLOSE STATEMENT Bunzl plc, the international distribution and outsourcing Group, is updating the market today relating to the twelve months ending 31 December 2012 prior to entering its close period. Overall trading has been consistent with expectations at the time of the Interim Management Statement in October. At constant exchange rates Group revenue growth for the year is expected to be approximately 6%, due to underlying revenue growth and the positive impact from acquisitions net of the disposal of the UK vending business in August 2011, with Group operating margin in line with the prior year. Underlying revenue growth for the year is expected to be about 2.5% against the background of a challenging comparative in the second half due to a particularly strong performance in North America last year. Acquisition growth is a key element of the Group's growth strategy. Including the two acquisitions announced today of McCordick Glove and Atlas Health Care, the Company has announced nine acquisitions year to date with annualised revenue from 2012 acquisitions of approximately £210 million. The current environment for acquisitions remains positive. The Group has recently refinanced some of its debt facilities by raising US$350 million of fixed interest rate borrowings in the US private placement market with maturities ranging from seven to 11 years at an average interest rate of 3.4%. US$110 million was drawn earlier this month with the balance due to be drawn in April 2013. Bunzl's strong cash flow and balance sheet should continue to enable the Company to take advantage of opportunities to consolidate further the markets in which it competes and increase shareholder value.
Commenting on the acquisitions, Michael Roney, Chief Executive of Bunzl, said:- "McCordick Glove enables us to enter the personal protection equipment sector in Canada which is a product area where we have already been very successful in a number of countries. It has a varied and successful range of own brand products which will enhance the Company's existing safety product offering. Atlas Health Care is an excellent addition to our existing healthcare supplies operations in Australia and gives us an enhanced market position in this growing sector. It will also allow us to expand their extensive product offering to our current healthcare customers. We are delighted to welcome all employees of both businesses to Bunzl."
BUNZL MAKES TWO FURTHER ACQUISITIONS Bunzl plc, the international distribution and outsourcing Group, today announces that it has made two further acquisitions in Canada and Australia. The Company has acquired the business of McCordick Glove & Safety Inc in Canada. Based near Toronto, McCordick is a distributor of gloves and other personal protection equipment to a variety of industrial and retail customers as well as to redistributors. Revenue in the year ended 31 December 2011 was C$53.0 million. Bunzl has also acquired Atlas Health Care Pty Limited in Australia. Based in Adelaide, the business is principally engaged in the supply of medical consumables to the healthcare sector. Customers include nursing homes, hospitals and medical centres throughout South Australia and Victoria. Revenue in the year ended 30 June 2012 was A$21.9 million.
http://www.investegate.co.uk/bunzl-plc-(bnzl)/rns/acquisitions/201212190700088771T/
Bunzl: Citigroup upgrades to buy from neutral.
Bunzl: Citigroup cuts target price from 1250p to 1190p, keeping a neutral rating.
Bunzl: Jefferies ups target from 860p to 880p, underperform rating kept.
Bunzl: Oriel Securities downgrades to 'hold', 1,200p target kept; Seymour Pierce retains hold rating and 1,000p target.
Positive Points: Bunzl announced today it had bought UK-based packaging firm Indigo Concept Packaging Ltd. Seven acquisitions have been announced so far year to date with annualised revenue of £163 million. Bunzl reported an improvement in its operating margin, being driven by acquisitions completed since 2011 and the sale of its UK vending business. Both geographical and customer industry diversification are enjoyed.
Negative Points: Bunzl remains sensitive to currency fluctuations. The group generates about half of its profits from North America so there is exposure in movements in the dollar on reported profits. The group boasts a good M&A track-record, but external growth could be considered more risky than organic growth. Acquisitions always bring an element of risk. The group would be exposed to margin risk were it not able to pass on price rises in its products.
Financial Highlights: At constant exchange rates, group revenue was up 5% for the third quarter and 6% year to date. No significant change in Bunzl's financial position during the period was reported. Bunzl reported substantial funding headroom availability and a robust balance sheet.
Interim statement: Bunzl continues its strategy with acquisition-led growth. Bunzl posted a 5% rise in quarterly revenue and said it would continue its strategy of acquisitive-led growth with more purchases this year. In North America, revenue growth was recorded as 5% with lower underlying growth of 2% when compared to the first half of 2012, due to a reduction in product input prices. Within Continental Europe, notwithstanding the economic environment within the region, Bunzl saw a slight improvement in underlying revenue growth. Elsewhere in the UK and Ireland, an improvement in operating margin increased profits, in spite of a sluggish economy. The Rest of the World region reported that the combination of underlying growth and the impact from acquisitions had led to substantial revenue growth albeit with some pressure on the operating margin. Bunzl also announced today the purchase of Indigo Concept Packaging Limited. Indigo is UK based and is principally engaged in the sale of quality retail packaging products to a variety of customers.
Company overview Bunzl PLC was incorporated in 1940 and listed on the London Stock Exchange in 1957, but its origins date back to 1854 when Moritz Bunzl opened a small haberdashery business in Bratislava, now the capital of Slovakia. Today the company is a leading specialist distribution group supplying a broad range of non-food consumable products that are essential for their customers to operate their businesses but which they do not actually sell. Active in 23 countries, Bunzl's main customer markets include grocery, foodservice, cleaning and safety, non-food retail and healthcare.
Shore Capital reiterated its "buy" recommendation for Bunzl (BNZL) ahead of the haulage company issuing its third quarter results. The broker expects the firm to report organic revenue growth of between 4% and 5%, driven by its North American operations. Shore added that the company's margins are likely to improve by around 10 basis points as its sales mix in the UK and North America improves. The broker noted that the group is still facing headwinds in the UK but believes that conditions will improve in the 2013 financial year. The shares dropped by 15p to 1,101p.
It's understandable why Bunzl is a defensive favourite. But its solid, low-growth defensive attributes indicate that its shares should be rated in line with similar companies - about 12 times earnings - rather than 16 times 2012's forecasts (see table). It's been a great run,........but as always dyor
The key then to sustaining the heady rating is a record of successful acquisitions. But growth by acquisitions always brings risks, as a recent blemish on Bunzl's record shows. The 1999 purchase of UK vending business Provend was sold last year for a loss of £56m. That meant reported pre-tax profits for 2011 (see table) were barely ahead of the £191m made in 2007. Bunzl has funded many of its bolt-on acquisitions through cash and debt, but, as the half-year results show, the room available to fund growth is getting tighter. Operating cash flow in the first half was down £8.2m to £133m as Bunzl had to fund an extra £42m of working capital. That meant free cash flow - the amount left over for shareholders - fell from £84m to £73m. Deduct £73m spent on acquisitions (£52m in the previous first half) and net debt rose £32m to £685m. Chief executive Michael Roney thinks there is still plenty of room left on existing borrowing facilities and he is comfortable increasing debt by around a further £300m if the right deal comes along. But some £430m of Bunzl's debt facilities and bonds are up for renewal over the next 12 months, almost double the amount that needed refinancing at the same time last year.
Bunzl has carved a successful and sizeable niche by supplying the food retail industry with stuff that customers need but don't buy - bags, labels and display items. Its steady growth characteristics have caused investors to pile in. Currently the price is 49 per cent up on its 12-month low and close to its record high of 1,168p. That puts its rating well above shares in similar companies, leaving little margin for error. It's time to bag profits and sell. The distributor has an enviable record of delivering steady growth in sales and adjusted earnings per share for the past 10 years. Add in consistent dividend growth since 1997 - and still lots of dividend cover - and its shares are an unlikely 'sell' candidate. But this week's first-half results for 2012 show that headwinds from falling cash flow and rising debt could constrain the acquisitions that have fuelled more than two-thirds of that growth. The food packaging and hygiene supplies distributor reported solid results at the halfway stage, with revenue up 7 per cent to £2.61bn, and underlying pre-tax profits up 9 per cent to £152m; the interim dividend was increased by 9 per cent in line with profits. But, take out last year's acquisitions, and underlying revenue growth was an uninspiring 4 per cent. Put another way, the current share rating is a high price to pay for a company growing at only around nominal GDP.
WH Ireland retained its "buy" stance on Bunzl (BNZL), impressed by the haulage company's growth in the US, Brazil and Australia. The broker said that the group has an unbroken record of free cash flow generation, with growth assisted by strategic bolt-on acquisitions. WH Ireland noted that the firm has completed six acquisitions during the first half of its financial year ending 31st December, including in the US, Israel and Switzerland, and expects more to follow before year end. Bunzl shares crept up by 8p to 1,124p.
While Investec has maintained its 'hold' rating for distribution and outsourcing group Bunzl, the broker says that company has once again delivered a strong trading performance. "Whilst we regard Bunzl as a strongly managed business that will continue to deliver solid growth over the medium term, we believe that this is largely reflected in the current rating and therefore do not change our 'hold' recommendation," Morton said.