Ansell’s growth slows

RELATED QUOTES

SymbolPriceChange
ANN.AX17.89-0.130
COH.AX57.15+0.560
CSL.AX67.53+0.430
PRY.AX4.69+0.040
RHC.AX45.32+0.310

Rubber glove and condom manufacturer Ansell (ANN.AX) has released results showing a softer than expected first half. While the company is still growing its top line, with revenues up 5% to $624m, this growth was largely due to acquisitions. The bottom line results were affected by increased costs, including costs associated with research and development (R&D), sales, marketing, and acquisitions, which caused earnings per share (EPS) to fall 15% to 42 cents per share.

Ansell is a well-run company with management that has a history of allocating capital in the interest of owners. At the latest results, shareholders’ interests were served well by a 7% increase in the dividend and the announcement of a 2 to 3 million share buyback. Ansell has a solid balance sheet, impressive levels of free cash flow, and high return on equity (ROE).With management reiterating unchanged full-year guidance of mid-single to low-double-digit growth, any weakness in the share price on the back of the interim results could be an opportunity to buy in to a quality company.

It’s shaping up to be an overall solid reporting season for the healthcare sector, with general practice (GP) consolidator and pathology service provider Primary Healthcare (PRY.AX) and blood product and vaccine producer CSL Limited (CSL.AX) both reporting solid growth in earnings. Meanwhile, bionic ear maker Cochlear’s (COH.AX) has reported flat results. Over the next couple of weeks, investors will also see the results from other firms including Sonic Healthcare (SHL.AX) and Ramsay Health Care (RHC.AX).

The Foolish bottom line

Growth is getting harder to find. An aging population and a growing Asian middle class are segments that should provide reasonable levels of growth and potential for profitable investments. Healthcare companies have above average exposure to these trends and make it a sector worth following closely.

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More reading

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool contributor Tim McArthur owns shares in Primary Health Care.

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