Ebos Group's recent acquisitions helped the pharmaceutical and animal health products maker lift first-half profit 7.2 per cent and fatten its dividend to shareholders, while also bolstering the outlook for annual earnings.
Net profit rose to $68.8 million, or 45.4 cents per share, in the six months ended December 31 from $64.2m, or 42.5 cents, a year earlier, the Christchurch-based company said. Revenue climbed 21 per cent to $3.96 billion. Forsyth Barr analyst Chelsea Leadbetter was picking net profit of $68.8m on revenue of $3.76b.
Ebos said profit would have been $3.7m higher had the kiwi dollar not appreciated against its Australian counterpart, and it upgraded annual guidance for underlying profit to be at the upper end of a previous projection for growth of 7-to-10 per cent.
Chief executive Patrick Davies told BusinessDesk that the firm's diverse portfolio helped offset any softness in some areas of the group. He's optimistic about the medium-term prospects for the group, with healthcare set to benefit from an aging demographic and spending on animal health on the rise.
"We think we're in some pretty good segments, that over the long term will continue to do reasonably well," Davies said. "We're exposed to underlying themes that are good, that are positive - you might see some bumps in the road but over the longer term good business in healthcare and animal care should do well."
Ebos transformed itself in 2013 with the purchase of Australian pharmaceutical wholesaler and distributor Symbion, its biggest-ever deal, and has since bought New Zealand vitamin and herbal tea maker Red Seal, pharmaceuticals firm Zest, Australian pharmacy retailer Good Price Pharmacy Warehouse, the BlackHawk Premium Pet Care pet food business, and more recently merged its Australian Chemmart pharmacy chain with rival Terry White Group.
The company's healthcare segment boosted revenue 18 per cent to $3.74b, and increased earnings before interest, tax, depreciation and amortisation 6.9 per cent to $106.7m, while animal care revenue was up 5.98 per cent to $216.1m for an 11 per cent gain in earnings to $21.1m.
Davies said Ebos is ready to make any new investments when the right opportunity presents itself, chiefly by managing a strong balance sheet. The company's net debt shrank to $288.1m as at December 31 from $379.3m a year earlier, or a ratio to earnings of 1.25 times down from 1.8 times.
The company's board looks at new investment options every time it meets and turns down far more than what it pursues, Davies said.
He's more interested in pursuing changes in the Australian pharmacy sector, using the merged Terry White Chemmart vehicle, with the sector likely to go through a period of consolidation, irrespective of whether regulation is changed to allow corporate investment.
Other areas that would pique Davies' interest would be in branded consumer products businesses that could potentially open export options and animal health products. The company is also investing in new automation in Australia for its healthcare distribution, with a A$55m factory in Brisbane expected to be completed next year.
The board declared an interim dividend of 30 cents per share, up 15 per cent from a year earlier, payable on April 7 with a March 17 record date. That's more than the 28.5 cent dividend predicted by Forsyth Barr's Leadbetter.
Ebos shares increased 0.2 per cent to $18.14, and have gained 39 per cent over the past 12 months.