The company has seen its bottom line swell at an annualised rate of 11.2% during the past five years alone. And with the UK government steadily stepping up investment in the country’s road network, demand for Hill & Smith’s products looks set to keep riding higher.

Indeed, Hill & Smith’s full-year trading statement released on Wednesday was treated with plenty of fanfare, a 6% share price advance pushing the stock to three-month peaks. Hill & Smith advised that revenues blasted 16% higher during 2016, to £540.1m, which is the company’s best result on record. And this propelled pre-tax profit to £68m, up 28% year-on-year.

Celebrating the results, chief executive Derek Muir commented that “our performance continues to be underpinned by our tried and tested strategy of international diversity together with the leading positions our businesses hold in their respective markets.”

And with infrastructure investment still rising, Muir added that “despite political and macro-economic uncertainties, 2017 is again expected to be a year of progress.”

City brokers certainly share my bullish take on Hill & Smith, and have chalked in earnings growth of 5% and 3% in 2017 and 2018 respectively.

Subsequent P/E ratios of 17.5 times and 17 times sail above the benchmark of 15 times regarded as conventionally good value. Still, I reckon investors should give short shrift to these slight premiums considering the company’s robust revenues outlook at home and abroad.

Brand heavyweight

Unilever’s (LSE: ULVR) vast portfolio of products can be matched by few others.

It is the immense diversity and pulling power of labels from Walls ice cream and Flora margarine through to Dove soap that tempted Kraft Heinz to make its mammoth $143m takeover bid last month, and it could well encourage the US giant to return sooner rather than later following this first rejection.

Despite experiencing a sales deceleration during 2016, the strength of Unilever’s brands still helped the group’s like-for-like sales grow 3.7% during the 12 months. And the business continues to throw huge sums at product innovations and brand roll-outs in new territories to keep sales on a northward tilt.

Such an approach has already delivered steady earnings growth at the London business, allowing the top line to keep growing despite pressure on shoppers’ wallets. And the number crunchers have slated further expansion in the medium term at least — rises of 10% in 2017 and 9% in 2018 are currently expected.

Like those of Hill & Smith, these figures create slightly-toppy P/E ratios of 22.5 times and 20.7 times respectively. But I reckon the evergreen allure of Unilever’s, added to the protection afforded by the manufacturer’s huge geographic footprint, more than warrant such high figures.

The post 2 great ‘safety’ shares for growth investors appeared first on The Twelfth Magpie.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Although Kraft Heinz swiftly announced that it was abandoning its attempt to buy Unilever (LSE: ULVR), a number of analysts expect Kraft Heinz would look to make a renewed bid for Unilever’s food and refreshments business. That’s because the US food group has big plans to shake up the low-growth foods industry and has the firepower to undertake such a deal, thanks to backing from Warren Buffett’s Berkshire Hathaway and Lemann’s 3G Capital.

But even if Kraft Heinz doesn’t return with another offer, I don’t expect things to return to normal for Unilever. I expect the failed bid to serve as a wake-up call for its management — and it seems that management acknowledges this too, as it released this statement on Wednesday: “Unilever is conducting a comprehensive review of options available to accelerate delivery of value for the benefit of our shareholders. The events of the last week have highlighted the need to capture more quickly the value we see in Unilever.”

Accelerate cost cuts

First and foremost, management will face pressure to boost margins. That’s because its near 15% operating margins lag well behind the 25%-30% margins generated by peers such as Reckitt Benckiser, Colgate-Palmolive and Kraft Heinz. It could look to accelerate its cost savings programme in a bid to match its rival manufacturers’ profitability, but a more aggressive approach may be adopted.

Paul Polman, chief executive, is well known for his long-term value-creation model, following his decision to scrap quarterly reporting at the company. But he may decide this is the time to focus more on short-term value, by adopting a strategy called zero-based budgeting, which 3G Capital’s austere empire-building relies upon.

Dividends/buybacks

Had Kraft been successful in buying Unilever at around 4,000p a share, this would have raised the combined company’s net debt to around 5-6 times its EBITDA. As a standalone company, Unilever has net debt of only €12.6bn, which shows that it has the potential to leverage up to unlock value.

Analysts from Credit Suisse believe that should it increase its leverage to a still modest level of three times EBITDA, that it has the potential to buy back €20bn worth of its shares, or pay a special dividend of around €7 a share, which equates to a yield of around 17%. With interest rates still hovering near record lows, a buyback could be significantly accretive to earnings per share, while special dividends would likely only be slightly dilutive.

M&A

An alternative to returning cash to shareholders could be to bulk up Unilever’s personal care business. Sales of personal care products are growing much faster than they are for foods, while margins are holding up better.

It’s clear that management is already expanding into the market with recent acquisitions, such as the Dollar Shave Club and Dermalogica, albeit it is doing so at a much slower pace. Some have speculated that a tie-up with US consumer company Colgate-Palmolive could be much more transformative.

Bottom Line

Exactly what Polman and his team will do remains to be seen, but if there’s one thing I’m sure will happen, it’s that Unilever will announce big changes in the coming months.

The post What to expect from Unilever plc after Kraft Heinz Co’s abandoned bid appeared first on The Twelfth Magpie.

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Jack Tang has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

At the time of writing, shares in Unilever are trading up by 12.2%, valuing the company at a little under £114bn, more than £1bn below the proposed offer price. Kraft has offered a mix of cash and shares for Unilever, which works out at around £40 per share of the Anglo-Dutch company. 

Unilever’s management has already rejected the Kraft offer claiming that it substantially undervalues the company. As of yet, it’s not clear if Kraft will return with a higher offer or attempt a hostile takeover. 

Major concerns

Kraft’s offer for Unilever has been met with a degree of caution from the City. Such a huge deal is bound to spark competition concerns. A combined Kraft-Unilever would give the enlarged group unrivalled bargaining power when it comes to negotiations with suppliers and retailers. What’s more, if the company wanted to hike prices, few retailers would have the power to stop them. It wouldn’t be just Marmite vanishing from the shelves of Tesco if Kraft-Unilever decided to fight the retailer over price. 

Another potential concern is the issue of job losses. When Kraft and Heinz first merged, the majority owner of both companies (3G Capital) announced 7,000 staff, or 20% of the workforce, would be cut. The private equity firm did the same when it took control of Burger King in 2010. Naturally, unions are already worried if this mega-merger takes place that similar job cuts will happen. The Unite union, which represents Unilever workers has already issued a statement asking Unilever’s management to reject the offer. 

Investor outlook

Investors should take today’s announcement about the potential tie-up of Unilever and Kraft with a pinch of salt. The two parties may yet reach an agreement but any deal will be subject to significant regulatory scrutiny and won’t be a simple affair.  

Unilever has always been a high-quality company and today’s offer does not change that. It makes no sense to base an investment case on Kraft’s offer. Therefore, it’s probably best for investors to do nothing. A deal may never happen, but there’s also a chance that Kraft may come back with a higher offer. As a result, trying to time the market by selling now with the idea of buying-in again may backfire. 

So overall, the best course of action for long-term investors is to not react to today’s news at all. Unilever is not a struggling company that needs to be acquired to survive, if no deal takes place, the company still has a bright future ahead of it. 

The post Does Kraft Heinz Co’s £112bn offer mark the end of the road for Unilever plc? appeared first on The Twelfth Magpie.

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• 3,566 shares in this FTSE 100 stalwart earns a £1,443 second income
• 2 FTSE shares for beginners starting an ISA
• Is this former stock market hero now the ultimate FTSE 100 buy and hold?

Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.