Ebos awaits outcome of hospital tender

By Chris Hutching

Friday 10th September 2004

Listed health products supplier Ebos is awaiting the outcome of a tender round for the services it provides to the Auckland District Health Board and which account for 25-30% of the company's pre-tax revenue.

Ebos managing director Mark Waller said the contract with Ebos subsidiary Health Support expired in June 2005 but the tender for providing services thereafter was expected to have been settled earlier this year.

It had been delayed for various reasons, including discussions about some changes being sought in the contract.

There has also been some turnover of senior staff at Auckland Hospital but it is unclear if this is one of the reasons for the delayed outcome of the tender round.

Shareholders appear unfazed. One broker said the news was probably already factored into the price.

Over the past month the share price has risen 20c to $3.95 before settling at $3.90 this week.

Waller said he believed it would be difficult for another company to replicate the bar-coded computerised ordering systems in place at Auckland Hospital that ensure smooth supply of products ranging from medicines to office equipment.

But he and senior management always took into account all possible scenarios affecting Ebos' contracts and analysed their profitability in case they were not worthwhile.

Waller said Ebos had invested considerable time and effort in the Health Support contract and losing it would be "a nuisance."

But Ebos had proved resilient and a steady performer even when agency marketing agreements had come and gone. (Ebos also owns well known retail brands such as Antiflamme, Allersearch and Liceblaster.)

Business acquisitions in Auckland and Australia made a bigger contribution to Ebos' earnings this year, with a profit after tax of $8.404 million ($6.416 million last year) and a final dividend of 11c a share, taking the total dividend for the June year to 20c a share (16.4c last year), a yield of 4.7%, on sales of $227.6 million (up 1.6%).

Since balance date the company has bought two new Australian companies, Stelmara Medical and Vernon Carus, for $8 million.

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