US Edition 
Questor share tip: Brammer in £54m cash call
Small-cap European industrial parts supplier has almost doubled the dividend during the past five years, says Questor.
Brammer
486¼p+1.5
Questor says HOLD
INDUSTRIAL parts distributor Brammer is to raise £53.7m through a share placing for further acquisitions. The company added that trading in the first quarter has reflected the modest improvement in the group’s markets seen at the end of last year and the cash raised will be used to pay down debts from previous acquisitions.
Brammer purchased Scandinavian industrial parts distributer Lonne in January for £19m. It is estimated this increased net debt levels to £90.8m against net assets on the balance sheet of £129m at the end of last year. The cash raised should see net debts fall back to a £40m level.
Exposure to European industry isn’t for every investor and that is why shares in Brammer are often overlooked. However, the company is worth closer examination.
Brammer supplies thousands of different parts for industry, from ball bearings to gearboxes and tools. All these parts have one thing in common in that they are moving and wear out with use. That provides the company with a fairly reliable recurring revenue stream.
Brammer’s business is also split across many different industries, ensuring that results aren’t exposed to a slowdown in any one sector.
The company is clearly vulnerable to an overall eurozone slump because, when factories reduce production, machine parts don’t wear out as quickly and this has a knock-on effect on Brammer’s sales.
The important point is that Brammer is not as prone to problems as many investors might think. The company has maintained or increased dividend payments during the past decade and almost doubled dividends over the past five years.
The Manchester-based group will place 11.3m shares at 475p per share to raise funds for further expansion.
The board believes that selective bolt-on acquisitions will complement Brammer’s “successful organic growth strategy” in expanding its markets and increasing the range of products on offer.
Brammer is a company with excellent growth prospects in Europe but the shares are trading on a forward price-earnings ratio of 18 times and are at 12-year highs.
One to watch but a hold for now.