In morning trade the Ansell Limited (ASX: ANN) share price has climbed 1% to $25.05 following the release of the health and safety protection solutions provider's half-year results.
Here are key takeaways from Ansell's first-half release:
- Sales from continuing operations up 8.8% on the prior corresponding period to US$722.2 million.
- Earnings before interest and tax (EBIT) from continuing operations of US$63.7 million, down 22% on the prior corresponding period. Adjusted EBIT increased 3.1% to US$84.3 million.
- Total Group EBIT of US$477.7 million due to a pre-tax gain of US$411 million on the sale of the Sexual Wellness segment.
- EPS from continuing operations of 46 U.S. cents, up 26% on the first-half of FY 2017.
- Increased half-year dividend of 20.5 U.S. cents.
- Outlook: Earnings per share in the range of 96 U.S. cents to 106 U.S. cents, compared to previous guidance of 91 U.S. cents to 101 U.S. cents.
All in all I felt this was a solid result from Ansell and goes some way to justifying its strong share price gain over the last few months.
The main drivers of its profit growth from continuing operations has been the positive outcomes from product innovation, brand focus, emerging market expansion, and strengthening channel partnerships.
This and generally positive external market conditions have delivered two consecutive halves with solid organic sales growth of 6% in the second-half of FY 2017 and 4.5% during the latest half. This hit the upper end of its target range.
Although higher material costs have weighed on its margins, management has managed to offset a good portion of this through limited price increases in competitive market conditions and ongoing productivity and cost reduction initiatives in its manufacturing facilities.
Ultimately, this led to strong organic revenue growth of 4.6% for its Industrials segment and 4.4% for its Healthcare segment.
Looking ahead, management appears to expect more of the same in the second-half. It has also increased its earnings per share guidance to between 96 U.S. cents and 106 U.S. cents thanks partly to U.S. tax reform and its share buyback.
Should you invest?
I think this restructured Ansell is a much more attractive investment option than it was a couple of years ago. However, with its shares close to a multi-year high I think they are fully valued based on its current growth profile. In light of this, I would hold off an investment until a better entry point emerges.
In the meantime, healthcare sector peers Nanosonics Ltd (ASX: NAN), Ramsay Health Care Limited (ASX: RHC), or ResMed Inc. (CHESS) (ASX: RMD) might be better options for investors.