I’ve admired the steady trading and consistent, well-balanced growth from specialist international distribution and services company Bunzl (LSE: BNZL) for some time.
The FTSE 100 company has a years-long record of delivering annual rises in revenue and earnings, backed by a robust torrent of incoming cash flow. You can see how well the firm has been trading in the dividend record – the payment is up around 52% over the past five years. In today’s full-year report, the company claims it has a 26-year track record of unbroken dividend growth, which I think speaks volumes about the strength of the underlying business.
A solid business model
And faithful investors have been well rewarded in other ways too. Since the end of 2013, the share price has risen by around 75%. Sometimes, you don’t have to dabble in small-caps to get very satisfactory investing results. Even FTSE 100 elephants can put on a good turn of speed when they want to!
Yet, the company isn’t some whizzy-dizzy tech outfit or a cutting-edge biotechnology hopeful. It isn’t cashing in on a new fashion craze or riding the fortunes of an up-and-coming new sector. The underlying business is mundane and as old as the hills. Bunzl supplies things like food packaging, grocery, films, labels, gloves, bandages, safety consumables, and products for cleaning and hygiene. But the company executes well and delivers businesses and organisations with a reliable and hassle-free supply of essentials they generally use themselves rather than reselling. Indeed, Bunzl helps to keep its customers ticking over.
Typically, customers hand over their in-house procurement and self-distribution function to Bunzl, which then sources and delivers stuff right to where it is needed at the customers’ sites and locations. It’s a good deal for customer-firms because they tend to save a packet on costs, and they reduce their carbon footprint too, according to the Bunzl’s website.
Good geographical spread and ongoing growth
In 2018, around 50% of adjusted operating profit came from operations in North America, 28% from Continental Europe, 14% from the UK & Ireland and 8% from the rest of the world. If you invest in Bunzl today on the London stock market, you’ll get exposure to a decent spread of international geographies with a clear bias towards North America.
I find today’s full-year figures to be encouraging. Constant currency revenue rose 9% compared to 2017 and adjusted earnings per share moved 12% higher. The directors expressed their ongoing confidence in the outlook by pushing up the total dividend for the year by 9%. Looking forward, chief executive Frank van Zanten said in the report the firm’s strong market position and a pipeline of acquisition opportunities means that prospects are good for both organic and acquisitive growth, “despite mixed macroeconomic conditions.”
The company committed £183m to acquisitions during the year and today announced a deal to take over California-based Liberty Glove & Safety, which serves the safety sector in North America, mainly with own-brand offerings. Indeed, expansion activity is vibrant and ongoing, and I’m happy to hold on to my shares in Bunzl.