More on Brambles
Brambles trading statement, disposal
The sale of Cleanaway UK was expected as Brambles focuses on its two remaining core businesses - Chep (pallet hire) and Recall (document storage).
The £595m for which Cleanaway UK was sold was good - it is 1.2× sales and 27× operating profit. It also means that Brambles’ disposals of non-core businesses is almost complete.
We expect Brambles to make more acquisitions in its core businesses. It has the money and Recall in particular looks rather undersized in the context of the group - it produces about a sixth the profits Chep does and it would hardly be worth retaining if it were not going to be expanded.
The core businesses continue reasonable growth with organic sales growth of 4% at Recall and total growth of 10% at Chep for the year to date.
At 425p Brambles is not cheap on a prospective PE of 20×. Even though EPS growth remains good, it is still difficult to justify the price, with the PEG close to 2×. For British investors the move to a single listing in Sydney, with the London listing being downgraded to a secondary listing means that liquidity is likely to become a concern as well.
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