Bear markets seem to suit Bunzl. The £1.8 billion distributor of disposable items to retailers, caterers and hospitals – everything from plastic forks to medical syringes – typically grows just ahead of GDP, which makes it a dull investment when better gains are on offer. But when stock markets slide and economies slow, its stolid qualities come to the fore. That explains Bunzl’s promotion to the FTSE 100 this year. It also explains the resilience of yesterday’s year-end trading statement.

Revenues are still rising at about 15 per cent, which puts Bunzl on course to deliver an 11 per cent increase in pretax profits this year. A stronger dollar has helped – it draws about half its sales from North America – but that should not detract from underlying gains.

In America, contract wins and Bunzl’s securing of new business with existing customers has kept operating margins steady at 6.5 per cent, while continental Europe continues to advance. Only in the UK and Ireland – where Bunzl has a higher than usual exposure to nonfood retailing and construction, to which it supplies safety equipment – are there signs of weakness. Here, underlying sales are flat.

The attraction is that about three quarters of Bunzl’s sales – to supermarkets, healthcare providers, contract cleaners and caterers – might be described as defensive. Falling oil prices will work in its favour – it spends heavily on fuel – while the full benefits of a weaker sterling have yet to feed through.

Further, its capital expenditure requirements are minimal: Bunzl is asset-light, leasing both its warehouses and trucks. That leaves two concerns. First, that currency moves are having an adverse effect on its balance sheet. With Bunzl’s borrowings in either euros or US dollars, its year-end net debt is forecast at £915 million, nearly £200 million more than before. That also limits Bunzl’s headroom to make acquisitions, the other worry.

Historically, the company has grown through bolt-on deals. Wisely, with valuations falling, it has not made any purchases since July – this year’s £118 million acquisition spend will be the lowest in five years – but this also means that its traditional source of growth has, to some extent, gone away.

At 590p, off 14p, or nearly 11 times next year’s earnings, and the dividend yield an unpersuasive 3.5 per cent, there will be better times to buy.

RWS Holdings

Andrew Brodie might be forgiven for monitoring the foreign exchange markets more closely than the average AIM chief executive. RWS Holdings, the patent translator which he runs, draws 95 per cent of its sales from outside the UK, about 65 per cent from the eurozone, and sits on £22 million of cash.

That exposure, together with a willingness to call currency moves, means that the company, only two months into its new financial year, is already sitting on a £700,000 hedging gain on the euro. That windfall is helpful given that trading has become more difficult in recent months. Yesterday’s full-year results show organic growth slowing to about 6 per cent, against the 10 per cent-plus RWS has previously achieved.

Part of the problem is the implementation in May of the London Agreement – the deal that waives the requirement for European patents to be translated into the language of individual European Union states – which will wipe £10 million from sales and £2 million from profits this year.

The other bother is that customers are showing signs of deferring work: the 30 per cent of RWS’s sales unrelated to patents – translating instruction manuals and the like – is typically more cyclical than the protection of intellectual property which, falling under R&D budgets, is an area most companies are loath to cut. The broader worry is RWS’s exposure to carmakers: Daimler and Porsche are big clients, as is BASF, a key supplier to the sector.

The upshot is that, currencies aside, this year’s profits are likely to be flat on last year. The short-term attraction lies with the ability of Mr Brodie, a 45 per cent shareholder, to deliver more of the sort of earnings-enhancing acquisitions that he has in the past. In the belief that he can, at 222¾p, or nine times earnings, and yielding 5 per cent, hold on.

Kentz

Not so long ago, a newly floated company might have been castigated for sitting on more than £100 million of cash, especially when low base rates provide such modest returns. But for Kentz, the onshore oilfield services group, which joined AIM in February, its failure to spend its IPO proceeds swiftly now looks like a virtue.

That has not stopped its shares, down 45 per cent since June, joining the sell-off of its sector that has accompanied the falling price of crude and has taken its stock market value to only £14 million higher than its cash. Such a slide seems unjust, given that Kentz operates in many areas where the cost of producing oil is low (two thirds of turnover is from the Middle East), and where government-owned oil companies appear committed to long-term capital expenditure.

Yesterday Kentz disclosed that it has won a $26 million contract to provide early-stage civil engineering services at Jubail, Saudi Arabia’s massive petrochemical scheme. The deal takes Kentz’s order book close to $1 billion and indicates that it can maintain a backlog of work when fears of project cancellations are to the fore.

But Kentz has yet to prove itself as a public company and sentiment on its sector is likely to remain poor until oil prices stabilise and oil companies prove that they will keep spending. At 104p, down 1½p, avoid for now.

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