Half Year Earning Update
Date: 21/2/2024
*** GENERAL AVICE ONLY***
Highlight
- EBOS reported strong growth across its diversified portfolio, particularly in its Healthcare and Animal Care segments.
- The company made significant investments for growth, including increasing its shareholding in Transmedic and acquiring Superior Pet Food Co.
- EBOS highlighted strong organic growth and strategic investments as key drivers for its performance.
- Investments in operational infrastructure to support growth, such as new contract logistics facilities and a pharmacy wholesaling center, were also noted.
- The company’s strategy includes further expansion in Southeast Asia and enhancing its product portfolio through acquisitions and new product development.
Financial Performance
- Revenue: Increased by 7.1% to $6,582.5 million, driven by growth in the Healthcare sector by 7.5%, despite a 1.7% decrease in Animal Care.
- EBITDA: Rose by 8.3% to $313.2 million, with Healthcare and Animal Care sectors up by 8.0% and 8.6%, respectively.
- EBIT: Grew by 8.5% to $259.9 million.
- NPAT: Net Profit After Tax increased by 7.6% to $152.4 million.
- EPS: Earnings Per Share went up by 6.6% to 79.5 cents.
- DPS: Dividends Per Share saw a growth of 7.5% to NZ 57.0 cents.
- Net Debt: Increased significantly, reaching $1,088 million, with the Net Debt to EBITDA ratio rising to 2.06x, reflecting the financial impacts of acquisitions and strategic investments.
*Abnormal financial impacts: The financials were influenced by one-off costs of $10.1 million related to a strategic transaction that did not proceed, as well as investments in acquisitions like Superior and an increased shareholding in the Transmedic business.
Business Operations
Healthcare Segment:
- EBITDA Increase: 8.0% growth, showcasing robust earnings.
- Market Leadership: Benefitted from leading positions in the Community Pharmacy and Institutional Healthcare sectors.
- Key Achievements:
- Increase in Community Pharmacy wholesale market share.
- Continued expansion and sales growth of TerryWhite Chemmart (TWC).
- Double-digit revenue growth in Institutional Healthcare, driven by increased hospital medicines sales, including specialty medicines and improved surgical volumes in the medical technology business.
- Growth in Australia: Notable EBITDA growth of 12.4%.
- Cost Management: Effective management in an inflationary environment, leading to an increase in the Underlying EBITDA margin.
- Infrastructure Investments: Ongoing investments across Community Pharmacy, Institutional Healthcare, and Contract Logistics.
- Increased Shareholding: In Transmedic to 90%, with an arrangement to potentially move to 100% ownership in approximately two years.
Animal Care Segment:
- EBITDA Increase: 8.6% growth, demonstrating strong resilience and earnings.
- Industry Shift: Managed well despite the industry’s shift towards larger national retailers, thanks to strong brand relationships.
- Product Development: Continued focus on new product development, leveraging in-house manufacturing capabilities.
- Wholesale Business: Solid underlying performance, though overall sales revenue was affected by a supplier starting direct supplies to vet clinics and cat vaccine shortages.
- Acquisition Performance: The acquisition of Superior Pet Food Co. in July 2023 is performing as expected.
FY24 Outlook
- Strong Earnings Growth: EBOS is satisfied with its robust earnings growth demonstrated in the first half of FY24 and is optimistic about effectively managing its EBITDA margin in the prevailing market conditions.
- Positive Trade Conditions: The company reports that trading conditions in January 2024 were favorable. The growth rates of Underlying EBITDA, both including and excluding the Chemist Warehouse Australia contract, have remained in line with the performances in the first half.
- Future Business Drivers: They are confident in delivering organic earnings growth across the Healthcare and Animal Care business units for the rest of FY24. This view is supported by an expected focus on proactively seeking and pursuing further bolt-on acquisitions.
- Specific Contract Update: The commentary clarified that EBOS will maintain the service under the Chemist Warehouse Australia contract until its expiry on 30 June 2024. Post this date, there’s no forecasted revenue from this project, which establishes a contained transition in their long-term trade perspective.
- Capital Investments: EBOS projects an increase in FY24’s capital expenditures compared to FY23, dedicated to persistent reinvestment in future business opportunities and in service facilities’ upgradation, with a more significant concentration on enhancing New Zealand’s Healthcare ventures.
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