Ansell Limited (ASX: ANN) reported its first half-year results for its 2019 financial year today, with the numbers presented by management somewhat convoluted.
Ansell is a safety company which manufactures protective equipment for the industrial and medical/healthcare industries. Ansell was probably best known for its condoms, but it sold off The Sexual Awareness division in 2017 and shortly after announced its ‘transformation program’.
Adjusted Profit Is… Up?
Ansell’s management reported that Adjusted Profit up 1.1% to US$63.6 million. In THE adjusted figure, they excluded costs relating to the transformation program. To make it even more confusing, the prior year adjusted profit includes further adjustments (that are not in the current year) for non-cash items that impact accounting profit.
Making Sense of The Numbers
Ansell’s statutory net profit was down 91% from US$429.1 million to US$40.1 million. However, the prior year figure includes the profit from the sale of the Sexual Wellness division. For this reason, it makes sense to compare the numbers from the continuing operations, which excludes the sale of the Sexual Wellness division.
Key Results
Ansell reported:
- Revenue from continuing operations up 0.4% to USD$725 million
- EBIT from continuing operations down 5% to USD$61 million
- Profit attributable to continuing operations down 41% to USD$40 million
- Dividend up slightly by USD 0.25cps or 1.25% to USD 20.75cps.
Management Commentary
Magnus Nicolin, Ansell’s CEO, said headwinds impacted the business in the first half and cited, “rising costs of raw materials, risks of US import tariffs, and some emerging areas of demand uncertainty in the EMEA automotive sector and in select emerging markets including Russia and Brazil”. However, he was more upbeat about the future citing the transformation program as expecting to deliver savings above target.
My Verdict
I am personally never a fan of management that presents adjusted earnings that exclude actual expenses. For Ansell, it’s the expenses related to the transformation program. For this reason, combined with a high valuation, Ansell is not a company I will be looking to add to my share portfolio.
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