As the market participants are aware, the coronavirus pandemic impacted numerous sectors. However, some companies are now anticipated to perform well moving forward. This company has robust balance sheet which could help it in navigating tough operating conditions. This company has also reported decent H1 FY 2021 results. The stock price of this company has increased by ~47% in 9 months. However, in the time frame of previous 6 months, the stock price rose by ~31.6%.
EBOS Group Limited
- EBO has logged excellent operating cash flow in H1FY21 at $98.7 million, up by 33.0% YoY that reflects its strong earnings growth and sustained disciplined working capital management.
- The company has achieved a ROCE of 17.5% in H1FY21.
- EBO reiterated its stance on its dividend policy of declaring dividends of not less than 60% of NPAT.
EBOS Group Limited (NZX: EBO) is engaged in the business of marketing, wholesaling, and distributing healthcare, medical and pharmaceutical products. With a presence in 61 locations across Australasia, it is the largest player in this business. The company is also a major player in the marketing and distribution of recognised consumer products and animal care brands.
Healthy H1FY21 Results Performance (For the Period Ended 31 December 2020)
The company has logged a healthy performance in H1FY21 with revenue growth of 6.3% YoY to $4.7 billion, driven by 5.9% and 15.7% growth in revenue from healthcare and animal care segments, respectively. Further, underlying EBIT witnessed a robust growth of 11.5% YoY backed by solid performances from healthcare and animal care segments. The Community Pharmacy, TerryWhite Chemmart, Institutional Healthcare, and Contract Logistics businesses contributed to the strong healthcare performance. However, Animal Care’s strong performance was because of Vitapet, Black Hawk, Accessory Products as well as Lyppard businesses as these businesses achieved double-digit sales growth. Resultantly, statutory net profit after tax grew by 13.7% YoY to $92.9 million.
The company has managed to make strategic acquisitions within the medical devices and animal care sectors, with ~$23 million of investment in H1 FY 2021. In the month of November 2020, the company acquired CH2’s vet distribution business for ~$9 million. In the month of October 2020, it acquired Cryomed for ~$14 million.
The company stated that amidst significant challenges of 2020, the company has remained committed to the proven strategy of driving organic growth in the leading healthcare and animal care businesses in NZ as well as Australia, along with the disciplined capital management. This enabled investing for growth with the help of complementary acquisitions as well as capital investments and paying increasing dividends to the shareholders.
Consolidated Financial Snapshot (Source: Company Reports)
Resilient Dividend Payment
The board of directors of the company has declared an interim dividend of 42.5 NZ cents for the first half of FY21, an increase of 13.3% YoY. The interim dividend was imputed to 25% and franked to 100% for New Zealand and Australian tax resident shareholders, respectively. The company has maintained its stance on its dividend policy of declaring dividends of not less than 60% of NPAT.
Dividends (Source: Company Reports)
Decent Balance Sheet Strength
EBO has further strengthened its balance sheet in H1FY21 and the group’s net debt to EBITDA reduced to 1.00x from 1.11x in June 2020. The current gearing provides the significant capacity to fund investments and acquisitions. EBO has no debt maturities until H2FY23 backed by the refinancing initiatives.
In the month of August 2020, the company extended the tenor of $400 Mn securitisation facility by the time span of further 3 years. In the month of February 2021, the company has refinanced $443 Mn of the term debt facilities, upsizing the committed refinanced facilities to $465 Mn, as well as extending the maturity dates to February 2024 ($172 million) as well as May 2025 ($293 million).
The company has announced that the current acting Chief Financial Officer (or CFO), Leonard Hansen, has been appointed permanently to the role of CFO. Leonard possesses strong knowledge of all the financial aspects of the business and has filled numerous senior finance roles throughout the company over the time span of last 9 years.
The company has also made an announcement about the resignation of Chief Executive Officer (or CEO) of the Animal Care and Consumer Brands businesses, Sean Duggan.
In line with the strategy of investing for growth, the company has completed two acquisitions during H1FY21. Notably, the Cryomed acquisition in the medical devices sector as well as the acquisition of CH2’s vet distribution business each strengthen the company’s existing presence in those sectors. Also, these acquisitions are EPS accretive to the company’s shareholders. The robust trading conditions which drove the company’s first half FY 2021 performance are still in place. In the month of January 2021, the company recorded group earnings growth at the levels which are consistent with the H1 FY 2021 growth.
The company is well-placed in terms of the scale and market-leading positions in stable industries along with its robust balance sheet. Therefore, the company could respond to any challenges as and when they arise.
On May 21, 2021, the company’s stock price ended the trading session at NZ$32.900 per share, up by 2.78%.