However, its 2026 guidance implied just 5% organic ebitda growth because of higher costs and softness in discretionary pet products, Morningstar said in its report on the result.<\/p>\n
Analysts have put the stock\u2019s weakness down to post-result earnings downgrades.<\/p>\n
The past few months have been eventful for dual-listed Ebos, which now has most of its business in Australia.<\/p>\n
In June last year, the company lost a lucrative contract to supply the Chemist Warehouse in Australia.<\/p>\n
In February, Ebos announced that long-serving John Cullity would retire as CEO and be replaced by Adam Hall, who has a background in mergers and acquisitions (M&A), effective from July 1.<\/p>\n
The company undertook a A$200m ($217m) placement in April and A$50m retail offer to fund the acquisitions of SVS Veterinary Supplies and the remaining 10% stake in Transmedic, a medical equipment supplier.<\/p>\n
In late May 28, Sybos Holdings – representing the Zuellig family interests – sold 27 million shares (13.2%) in Ebos at $35.50 a share in a block trade.<\/p>\n
Sybos also entered a 90-day escrow period for its remaining 4.9%.<\/p>\n
Shane Solly, portfolio manager at Harbour Asset Management, said some of Ebos\u2019 weakness could be put down to the number of new shareholders added to the register after the Sybos sale and capital raise.<\/p>\n
He said there may have been a few who were unused to the idea that Ebos has had its ups and downs over the past three decades.<\/p>\n
\u201cIt\u2019s a business that does grow through acquisition and has periods of going sideways,\u201d Solly said. <\/p>\n
\u201cUnfortunately, this is a period of going sideways.\u201d<\/p>\n
He said the company\u2019s communications going into the result were poor, and there were expectations that Australian pharmaceutical activity would have been better than proved to be the case.<\/p>\n
\u201cThere was an element of new investors who were quite widely disappointed by a result that was not what they expected.\u201d<\/p>\n
Ebos in recent years had delivered consistent growth, but not this time.<\/p>\n
\u201cIf you combine that disappointing earnings outcome with a change in management, it looks like the new management team has been given a bit of a hospital pass.<\/p>\n
\u201cI\u2019m not saying anything negative about the previous management team. It\u2019s just that\u2019s a tougher run for this current team.\u201d<\/p>\n
Ebos has been adding businesses for decades, and made a good call getting into pet care about five years back.<\/p>\n
\u201cOver that time, it\u2019s been a great wealth generator and the pieces are still there,\u201d Solly said.<\/p>\n
Ebos Group is one of the largest suppliers of international healthcare brands in the Australasian region.<\/p>\n
The stock had run hard, entered a correction, but was now back to trading at long run average valuation multiples.<\/p>\n
\u201cIt\u2019s had a reset of earnings and it\u2019s had a reset in evaluation, so it\u2019s a bit of a double negative.<\/p>\n
\u201cEarnings have come back to numbers that are potentially more reasonable – we will only find out in time.\u201d<\/p>\n
\u201cOver the last 10 years, the price to earnings multiple average for Ebos has been 21 times for prospective earnings, and it is currently at 19.4 times.<\/p>\n
\u201cIt means that the market still wants to back the business, but it doesn\u2019t want to back it as much as it was – it had gotten stretched.\u201d<\/p>\n
The good news for Ebos is that September 22 will see the stock included in the influential S&P\/ASX200 Index.<\/p>\n
Fonterra: What to do with a lazy $1b?<\/p>\n