Ebos Group Limited Analysis

Overview

Formerly Early Bros Dental & Surgical Supplies Ltd, the company's business was restructured in the 1990s. The major focus now is the marketing of medical consumable products, and growth has been assisted by acquisitions on both sides of the Tasman since 1996. These included Richard Thomson & Co, Health Support Ltd, Maygar Medical, Medic Corporation, Nature's Kiss creams and the Australian Allersearch range of asthma products.

In October 2002 it announced a joint venture of its former Medic Scientific division with Global Science, giving EBO 47.5% of the new entity. In 2004, the company acquired healthcare product distributor Vernon-Carus and the Melbourne based company, Stelmara Medical.

In January 2005 it increased its stake in Global Science from 47.5% to 67% and in March that year acquired the Australian business of Quantum Scientific. In December 2005 it raised its shareholding in Global Science to 100%. Global Science also acquired 100% of Scientific Supplies Ltd - a NZ-based specialty supplier of chemicals to the scientific market.

In August 2007, it acquired pharmaceuticals distributor PRNZ for $86.3m in cash and shares. In July 2008 it acquired MedBio Scientific.

In April 2009, EBO entered into a new issuance and share buyback as part of its profit distribution plan. Under the Profit Distribution Plan shareholders can elect to have the company buy back shares issued to them under the Plan at the issue price of $4.691798 per share.

As a result of shareholder elections the company achieved an off-market buy back of 279,875 shares. Of the total number of bonus shares issued in respect of the 2009 interim profit distribution (of 10.5 cps), 74.1% of shares are being retained with 25.9% electing the buyback option.

The company has elected to cancel all of the 279,875 shares bought back. With the issue of 1,080,305 new shares and the cancellation of 279,875 shares bought back, the total number of shares on issue is now 48,980,799.

On 14 June 2013, shareholders elected to proceed with a pro-rata renounceable Entitlement Offer of 7 new ordinary shares for every 20 existing ordinary shares held on the Record Date. The transaction settlement is expected to take place on or about 5 July 2013.

In November 2015, the company acquired Red Seal, a leading New Zealand natural health product business, for NZ$80 million.

Performance

The following information was extracted from EBOS Group Limited's half year results, released on 21 February 2024:

EBOS ACHIEVES STRONG GROWTH REFLECTING THE BENEFITS OF ITS DIVERSIFIED PORTFOLIO

Half-Year Highlights:

• Revenue of $6.6 billion (up 7.1%)
• Underlying EBITDA of $313.2 million (up 8.3%)
• Underlying NPAT of $152.4 million (up 7.6%)
• Underlying EPS of 79.5 cents (up 6.6%)
• Interim dividend declared of NZ 57.0 cents per share (up 7.5%)
• Continued strong performances from both our Healthcare and Animal Care segments with Healthcare Underlying EBITDA up 8.0% and Animal Care Underlying EBITDA up 8.6%
• Stronger Group Underlying EBITDA growth of approximately 10% when normalised to exclude the Chemist Warehouse Australia contract
• Significant investments undertaken in the half, in line with our strategy of investing for growth:
• Increased shareholding in our Southeast Asian medical technology distribution business, Transmedic, to 90%
• Completed the acquisition of Superior Pet Food Co. (Superior), a leading New Zealand manufacturer and supplier of premium dog rolls
• Capital expenditure of $66 million invested into our operational infrastructure
• ROCE increased by 70 bp to 15.1%, in line with target

In commenting on today’s results, EBOS Chief Executive Officer, John Cullity said:

“We are pleased to report another strong performance for the Group driven by continued organic growth as well as several strategic investments. The Group also continued to deliver strong normalised growth excluding the Chemist Warehouse Australia contract, with Underlying EBITDA growing by approximately 10%, demonstrating the benefits of our diversification, which provides multiple growth levers.”

EBOS’ Healthcare segment benefitted from its leading market positions and had solid contributions from each of the Community Pharmacy, TerryWhite Chemmart (TWC) and Institutional Healthcare divisions and businesses. Underlying EBITDA margins were maintained due to continued effective cost management in the current inflationary environment.

The Animal Care segment demonstrated strong resilience, as the specialty pet industry experiences a shift towards larger national retailers. The strength of our brands and our longstanding relationships with these retailers positions us well in the changing environment. The branded business also continues to focus on its new product development pipeline, leveraging our in-house manufacturing capabilities.

Consistent with our strategy of investing for growth, we increased our shareholding in Transmedic to 90% and entered into an option arrangement that will facilitate us moving to 100% in approximately two years. Transmedic is one of the largest independent medical device distributors in Southeast Asia with a presence in seven countries. The transaction reflects our confidence in the business and is consistent with our strategy to explore further growth opportunities in Southeast Asia.

In addition, we completed the acquisition of Superior, which is a leading New Zealand manufacturer and supplier of premium dog rolls and supplier of dog treats. This acquisition expands our portfolio of branded products in attractive categories, increases our in-house manufacturing capabilities and accelerates our new product development initiatives. Since being acquired, Superior has performed in line with expectations.

In commenting on today’s result, EBOS Chair, Elizabeth Coutts said:

“It is pleasing to see EBOS continue its long term growth trajectory and deliver value for our stakeholders. The success we have achieved is the result of the combined efforts of our more than 5,000 employees across New Zealand, Australia and Southeast Asia. On behalf of the Board I would like to acknowledge their commitment to our businesses and the communities they serve.”