The Asaleo Care Ltd (ASX: AHY) share price has come under pressure on Wednesday.
At the time of writing, the personal care products company’s shares are down 1% to $1.27.
Why is the Asaleo Care share price dropping lower?
Investors have been selling the company’s shares this morning following the release of an update on both its performance in FY 2020 and a recent takeover approach.
In respect to FY 2020, Asaleo Care reported unaudited full year revenue of $419.2 million, which represents a 2.3% year on year increase.
This was driven by a strong performance in all retail segments and the B2B Incontinence Healthcare segment, which were collectively up 6.7%. Offsetting some of this growth was a 4% decline in B2B Professional Hygiene, which was impacted by COVID-19 restrictions on “away from home” activity.
Asaleo Care’s underlying earnings before interest, tax, depreciation and amortisation (EBITDA) came in at $87.2 million for the 12 months. This was ahead of its previous guidance of the upper end of $84 million to $87 million. Excluding discontinued businesses (Baby NZ), underlying EBITDA was up 6.3% to $89.2 million.
At the end of the period, the company’s net debt had reduced from $139.3 million to $94.9 million. It believes this gives it the balance sheet flexibility to fund dividends and accommodate accretive bolt-on acquisitions.
FY 2021 and FY 2022 Guidance
Management believes the company is well-placed to deliver continued revenue growth in FY 2021 and margin expansion from FY 2022.
In light of this, in FY 2021 it is targeting revenue growth of 5% to 7% and EBITDA of $90 million to $93 million.
After which, in FY 2022 is aiming for mid-single digit revenue growth and EBITDA growth of 10%+.
Takeover update
The Independent Board Committee has responded to December’s unsolicited, indicative, conditional and non-binding proposal from Essity Aktiebolag to acquire all the shares in the company for $1.26 per share.
According to the release, after careful review, the committee considers that the proposal fundamentally undervalues Asaleo Care and is materially inadequate.
Asaleo Care’s Chairman, Harry Boon, commented: “The Independent Board Committee, after careful review, considers that the Proposal fundamentally undervalues Asaleo Care, is materially inadequate and does not reflect the strategic value of the company to Essity. However, the Committee remains open to further engagement.”
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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