On the face of yesterday’s 2013-14 profit figures, Ansell (ANN) is another company paying the price for a takeover which has cost the company a big writedown as it goes about revamping the entire business.
Ansell warned the market in late June of big write-downs from the integration of the BarrierSafe Solutions International, so that advance update meant yesterday’s 70% headline drop wasn’t such a big surprise.
And helping investors cope with the big drop in headline earnings, the 2013-14 results yesterday show management has assured shareholders that the two recent acquisitions – BarrierSafe and an earlier purchase the Midas glove maker of South Korea – are performing ahead of expectations.
Certainly both have boosted Ansell’s revenues and earnings (before the impact of the writedowns) by enough to justify the purchases, especially BarrierSafe which saw Ansell add some $US600 million in extra debt.
But the solid underlying performance and and upbeat outlook seems to be why the company is paying a final dividend of 22c a share, unfranked and boosting total dividend for the year to 38 USc a share (39 Ac), up 6% – a reward shareholders will appreciate.
The shares dipped slightly on the news of the lower headline profit, but once investors had looked at the underlying figures, and taken in the upbeat outlook for 2015, they chased them higher and they closed up 4.4% on $19.81.
ANN 1Y – Ansell earnings down, but up as well, along with dividend
Ansell said its full-year net profit dived 70% to $US41.8 million, thanks to the previously revealed major business restructure and associated $US124.7 million write-down announced at the end of June.
(That raises the question if Ansell paid too much for BarrierSafe in late 2013 when it paid $US515 million. The write-down and restructuring losses would indicate the real price should have been $US100 million or more lower.)
Putting the write-down to one side, Ansell reported an underlying net profit of $US157 million, a better than market forecasts of around $156 million. The costs of the restructuring saw Ansett downgrade its EPS estimates for the 2014 year to a range centred on $US1.10 a share, which was what was reported yesterday.
Now the company has forecast a 7% to 15% rise in net profit for the year to June 30, 2015, with EPS rising to a range of $US1.18 to $US1.26 a share.
Ansell Chairman Glenn Barnes said in yesterday’s statement "With robust underlying profitability flowing through to strong cash flow, it is pleasing to be able to see a continuing trend of increasing dividends to shareholders."
"As management leverage the efficiencies from a new organisational structure, increased scale and the successful integration of recent acquisitions, the Board also believes the Company has created a strong platform for growth in F’15," he added.
Revenue in the year to June 30 rose 16% to $US1.59 billion, which was in line with analysts’ forecasts.
Chief executive Magnus Nicolin said in yesterday’s statement the result was underpinned by “successful acquisitions and delivery against our innovation strategy with new product releases driving encouraging 4 per cent organic growth in hand protection.”
“In addition, the recent restructuring has created an opportunity to streamline parts of the business and improve our focus on the verticals where we see greatest growth potential,” he said in yesterday’s statement.
Ansell’s largest business unit, Industrial, which supplies equipment to industries such as oil and gas, chemical and manufacturing,saw a 10.2% rise in sales, while earnings before interest and tax (EBIT) rose 3.9%.
The Single Use division, which supplies disposable equipment to food and life science industries, saw a 68.2% rise in revenues and a 185% jump in EBIT, thanks to the acquisition of BarrierSafe.
Revenues in the medical division were up 20.1% and EBIT jumped 40%.
But the Sexual Wellness business, which is the condom division, reported a 7.4% fall in revenue and a sharp 27% fall in EBIT. That sounds like it either needs work to cut costs, or perhaps a sell-off.
