UPDATED: Ebos Group heading for record annual earnings, sees Asia opportunities in medium term

UPDATED: Ebos Group [NZX: EBO], which is heading for a record profit this year, sees opportunities to expand into Asia in the medium term, possibly in partnership with its biggest shareholder, Hong Kong-based Zuellig.

The healthcare and animal care products company today posted a 12 percent gain in first-half profit, driven by growth in both divisions and lower finance costs, and said it expects similar growth in the second half, meaning full-year earnings would surpass last year's record $92 million.

The Zuellig family interests took a 40 percent stake in the company when they sold Australian pharmaceutical wholesaler and distributor Symbion to Ebos in July 2013, transforming the company and tripling its revenue.  Ebos has continued making acquisitions, buying a stake in Australia's pharmacy retailer Good Price Pharmacy Warehouse and the BlackHawk Premium Pet Care pet food business in the first half, winning a state-wide hospital supply contract in New South Wales and opening a pharmaceutical distribution centre in Melbourne.

"Coping with growth is one of the nicest problems you can have," said chief executive Patrick Davies. "We have a hunger and the fire power to do more acquisitions. In the next 18 months to two years we're unlikely to do anything major beyond the ANZ region. There's an opportunity beyond that to look at selective countries in Asia."

That could be driven by the animal care division, capitalising on what Davies says is a flippant comment that with an emerging middle class, people in some countries will "stop eating their pets and start caring for them." In healthcare, "Westernisation continues at a pace, and the market place will continue to mature," he said.

“Our business model continues to drive the profitable development of the group and is allowing us to continue to pursue opportunities for the benefit of our customers and shareholders,” Davies said earlier.

The company will pay a first-half dividend of 22 cents a share, up 7.3 percent from a year earlier. Ebos shares rose 4.17 percent to $10.00 after the first-half results were released, which showed both sales and earnings beat some estimates.

Ebos's pretax earnings would have been higher but for the impact of a strong kiwi dollar against the Australian dollar, which reached a post-float high at the start of calendar 2015. The currency reduced earnings by about $2.2 million in New Zealand dollars, Davies said.

The company's biggest business, healthcare, lifted sales by 3.7 percent to $2.93 billion, driving an 8.5 percent gain in earnings before interest and tax to $78.5 million. Its animal care unit had an 8 percent lift in revenue to $191 million and a 7.5 percent gain in earnings before interest and tax to $15 million.

Net finance costs fell almost 19 percent after the company renegotiated a $402 million securitisation facility expiring in 2018, on improved margins, and extended its $260 million of term debt, also on improved margins. The company's debt is split 80 percent in Australia, 20 percent in New Zealand.

Ebos's gearing ratio rose to 26.9 percent at Dec. 31 from 24.4 percent six months earlier, mainly due to the debt-funded acquisition of BlackHawk for $58.7 million. Even after that transaction, Ebos said it had "ample headroom available in debt facilities to undertake further acquisitions."

(BusinessDesk)