Ebos profit drops 4 per cent due to one-off costs

Ebos chief executive John Cullity. Photo/File.

Ebos Group said one-offs dented its first-half net profit slightly but the underlying result was boosted by strong performance in the animal care segment.

The pharmaceutical and animal health products company said net profit fell 4 per cent to A$67 million in the six months to December 31, 2018 versus A$69.9 million in the same period a year earlier. Earnings per share were 44.1 Australian cents, also down 4 per cent.

"The group's statutory results were negatively impacted by A$8.8 million relating to costs associated with M&A (mergers and acquisitions), rationalising warehousing facilities and employee redundancy costs, partially offset by the gain on sale of surplus property," it said.

Its underlying profit, stripping out one-offs, was A$72.7 million, up 4 per cent on the previous comparable half year.

Revenue was A$3.5 billion, down 2.7 per cent on the prior comparable period. The dip in revenue was driven by driven by lower hepatitis-C medicine sales and the impacts of pharmaceutical benefits scheme reforms in Australia, it said.

"Falling medicine prices, rising operational costs across the industry and a failure to fully resolve the issue of equal access for the distribution of PBS medicines have had an impact on our performance," said chief executive John Cullity.

Underlying earnings before interest, tax, depreciation, and amortisation were A$131.4 million, up 4 per cent.

Its healthcare division lifted earnings 3 per cent while animal care was up 9.6 per cent. Within the animal care segment, the lift in earnings was primarily due to Black Hawk sales revenue growth of 23 per cent, it said.

"Black Hawk recorded double-digit revenue growth in both Australia and New Zealand and is now well established as one of the region's leading premium pet food brands," said Cullity. The company estimates the Australasian pet sector is worth about NZ$14 billion.

The Consumer Products division recorded revenue growth of 9.6 per cent, principally driven by Red Seal's continued strong performance in both domestic and international markets, and sales from the recently acquired Gran's Remedy brand.

Cullity said the first half was marked by several strategic acquisitions for a total investment of A$92.5 million. These included a move to 100 per cent ownership of Terry White Group along with another three small-to-medium sized bolt-on acquisitions.

Its net debt to ebitda ratio increased to 2.16 times from 1.74 times on June 30, 2018 while its return on capital employed was 16.1 per cent versus 16.3 per cent at June 30.

Last year, Cullity said Ebos had between NZ$150 million and NZ$200 million available for acquisitions without stretching net debt beyond its target of 1.5-to-2.3 times ebitda.

The company declared an interim dividend of 34.5 New Zealand cents a share, up from 33 cents a year earlier. The record date is March 15 with a dividend payment date of April 5. The interim dividend will again be imputed to 25 per cent for New Zealand tax resident shareholders and will be fully franked for Australian tax resident shareholders.

Looking ahead, "we expect the group to generate full-year underlying earnings growth in FY19 with further growth forecast into FY20 as we commence servicing the Chemist Warehouse contract volumes," it said.

Ebos has signed a contract with Chemist Warehouse Group for the exclusive wholesale distribution of pharmaceutical products to more than 450 Chemist Warehouse and My Chemist stores in Australia from July 1.

Sales to the CWG stores are estimated to generate approximately A$1 billion in revenue in the 2020 financial year.

The stock last traded on the NZX at NZ$21.96 and has lifted 28.1 per cent over the past 12 months.

- BusinessDesk