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Brammer plc (LSE:BRAM) may not be a household name, even to investors, but it is a company worth watching.
Brammer released its preliminary results for the year ending 31 December 2012, this morning. The results include an 11.9% increase in revenue to a record £639.6 million, up from £571.5 in 2011. That alone might be considered reason enough for the 2.35% increase in its share price on the LSE today. The share value was at 349.0 by early afternoon.
The company also reported increases in operating margins, operating profits, gross margins, and pre-tax profits:
- Operating margins increased year-on-year to from 5.6% to 5.8%. This also is a record high.
- Operating profits increased from £31.8 million to £37.2 million.
- Gross margin increased by 20 basis points to 30.5%.
- Pre-tax profit was up 19% from £29.0 million to £34.5 million.
Brammer increased its shareholder dividend to 9.4 pence, up from 8.4 pence in 2011.
All of the numbers are interesting, but there are other reasons to watch Brammer, including the nature of its business.
Fundamentally, Brammer is an MRO (maintenance, repair, operations) parts supplier to a broad range of industries from manufacturing to recycling. It is the largest company of its kind in Europe. Brammer carries over 350,000 items in stock at any given time, with the ability to deliver 24/7/365 through a network of 12 state-of-the-art warehouse and distribution facilities.
MRO suppliers are among the kind of companies that operate outside of the limelight. However, without them, the show would not be able to go on. They are especially important during economic crunch times – like now. When manufacturing companies are holding back on capital expenditures, the decision makers tend to look at the the decision to do so as a cost avoidance. However, instead of being replaced, old equipment will be repaired, creating a greater need for the maintenance, repair, and operations supplies, from hard parts to lubricants.
Even more so, Brammer is growing through the addition of complementary cost reduction services, including MRO inventory management, planned maintenance programs, waste management, and safety training. Brammer provides services that reduce acquisitions costs, at least in part by conducting supplier reviews and eliminating unnecessary and costly suppliers. They conduct process reviews to increase efficiency and throughput in manufacturing. Where appropriate Brammer will place individuals or teams with a customer’s facility to put controls into place that result in cost reductions through refined and improved procedures. Brammer recently helped a concrete block manufacturer realize an annual cost savings of €665,500. That kind of result looks pretty good when it drops to the bottom line.
The simple point is that Brammer is the leading company in Europe to which manufacturers look for MRO supplies. It is also rapidly become the leader in providing efficiency improvement and cost reduction programs to companies who need to trim costs to gain, maintain, or improve profitability. Brammer is a supplier of necessary services on both levels, and the tougher the economic crunch, the more in demand their supplies and services become.
Brammer CEO Ian Fraser said, “We believe this performance again demonstrates the consistent and successful application of our proven long term strategy and the strength of our management team.” Which is to say that this is a company with a strategy that works in the best of times, but that works even better in the worst of times. It is a company worth watching.
