Daily ShareChat: Ebos Group

By Jenny Ruth

Monday 22nd March 2010

Medical supplies company Ebos produced an "outstanding" first-half result with net profit up 32% to $11.7 million compared with his $10.5 million forecast, says Morningstar analyst Nachi Moghe.

The result was on flat revenue of $697.2 million with earnings from its scientific division soaring from the extremely depressed levels of last year and the company cut $1.3 million in staff costs through headcount reduction and productivity gains from investing in automation and technology. Reduced debt and lower interest rates delivered $1.1 million savings on interest costs.

Moghe says the standout feature of the result was free cashflow of $11.5 million, spurred by a significant reduction in working capital, allowing net debt to be cut to $29 million at December 31 compared with $70 million a year earlier.

"Return on capital continues to be impressive at 16%," he says.

Ebos didn't buy any businesses in the first half, although it said it looked at a few. "It is keeping an eye on opportunities in the healthcare and scientific space and is keen on growing in Australia which offers better long-term growth prospects."

Moghe estimates Ebos' balance sheet could support acquisitions between $50 million and $100 million. Moghe has raised his valuation to $6.75 a share from $6.50.

BROKER CALL: hold (down from accumulate because of the share price rise from $5.97 ahead of the results announcement to $6.44 on Friday.)

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