@pastperformer,
At first glance, the result looks weak: it was up 5.7% at the Pre-Tax Profit line, which itself was soft, but only 4.2% excluding the $39m profit on asset sale.
I don't think the market will like this sluggish operating performance.
The bottom-line was assisted by improved non-operating items, lower interest expense and slightly softer tax rate (19.1%)
But then when I delved into the segmentals, the result score went from an "E" mark in my mind to maybe a "B+", because the critical part of the engine that really needs to perform well, namely Behrings, certainly is doing so.
Behring's Revenue was up 10% and, importantly, the GP Margin improved by a further 110bp on pcp, to 51.1% (over the past three Dec half-years it has gone: DH22 = 49.0%; DH23 = 50.0%; DH24 = 21.1%). As a result, Behring's EBIT rose 13%.
So I score Berhings an "A" mark.
Even the problem child, Vifor, rebounded out of the gutter, with 7% Revenue growth, 70bp improvement in GP margin to 67%, and hence, 14% growth in Operating Profit.
Therefore, Vifor also gets an "A" mark.
But, as you said, Seqirus was dismal, fully justifying the market concerns about vaccine hesitancy heading into the result. Seqirus Revenue fell by 8% (and that's after cycling pcp DH23 which was already showing insipid performance vs DH22). This contraction was compounded by yet another drop in Seqirus' GP Margin, to 62.9% (DH23 was 66.9% and DH22 was 68.8%, so Seqiris' GP Margin has been crunched by a whopping 600bp over the past two years!).
Clearly, Seqirus' drag on group earnings means it needs to get an "F" mark.
The balance sheet looks only marginally better with Net Debt falling by only $100m over DH24, although it must be noted that Dec halves are seasonally weaker than June halves (Net Debt was down $700m from 30 Dec23 balance date). Current Ratio is down on pcp, but still very manageable at 1.9 times.
As evidenced in JH24, company is throttling back on investment, with almost $200m reduction in investment in PP&E and Intangibles in DH24 vs pcp. FCF was $730m in the half ($1.87bn over the LTM), so they are doing what is needed to hit the debt on the head. While it is going to take a few years, the relevant metric I use (NIBD-to-EBIT) is certainly moving in the right direction as the numerator grows and the denominator contracts. (NIBD over past three December half years: DH22 = 5.0x, DH23 = 4.2x, DH24 = 3.8x)
So cash flow and balance sheet score a "C+" in my mind.
Weighted averaging all these qualitative scores results in the crude "B+" mark overall.
Trouble is, I think the market is not going to look any further than the required back-loading of the guidance into the second-half, and therefore conclude that this result is a ....er... "miss" (I think that's the term that gets used).
So while "B+" from me, I expect the market will score "E"
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