Questor share tip: Bunzl expands in Brazil

Bunzl
£15.84+19p
Questor says HOLD

BUNZL has reinforced its credentials as one of the top defensive shares in the FTSE 100. Shares in the distribution and outsourcing company have risen more than 10pc this year, against a blue-chip index down 2.3pc.

Yesterday, Bunzl continued its strategy of growth through acquisitions by expanding its Brazilian healthcare operations. The group said it had purchased Lamedid Comercial e Servicos, a manufacturer of medical and healthcare consumables such as syringes and catheters.

Bunzl has carved out a successful and sizeable niche by supplying the food retail industry with bags, stationery and display items or, in its own words: “Essential items the customer uses but does not actually sell.” Centralised bulk-buying that reduces costs allows Bunzl’s customers to focus on their core business.

Bunzl does not move into a new country and try to set up shop. It tends to buy family-run businesses where the current management is looking for an exit strategy. The businesses are not usually for sale because they are in distress; there could be succession issues or even divorces that led to them being sold.

Bunzl entered Brazil in 2008 and has so far bought companies in the safety, cleaning and hygiene sectors. Expect more purchases ahead.

The company posted its annual results last month, which were well received. In the year to December, revenues rose 14pc to £6.1bn, with pre-tax profits rising 17pc to £372.2m.

Analysts expect the company to deliver revenues of £6.2bn and pre-tax profits of £372m, giving earnings per share of 82p this year.

The dividend for the year is 32.4p, which is an inflation busting 15pc year-on-year rise. The payment date is July 1, ex-dividend May 7, and the prospective yield, based on the current forecast, is 2.1pc.

Bunzl remains a class defensive share. Hold.