It's tough staying on top. And after the stellar run that healthcare groups have experienced in recent years, the defensive play is beginning to look a little tired.
Condom and industrial clothing maker Ansell (ANN), one of the biggest beneficiaries of the rush to defensives, has been trading at almost 18 times earnings, well above its long term average of less than 14.5, and in the past year it desperately has attempted to extract revenue growth from its operations while limiting costs.
With organic growth becoming increasingly difficult, the company has reverted to acquisitions to maintain momentum and has earmarked around $300 million for purchases this year.
This morning's announcement – the $US41.1 million purchase of Korean glove maker Midas – continues that strategy.
Last year was a difficult one for Ansell. Its first half result was a disaster as distributors reduced inventory and scaled back on purchases. While the company recovered in the second half, there was no escaping the fact that the performance was all about cost reduction and buying growth as its top line stagnated.
There are serious doubts as to whether the margin expansion in the second half of last financial year can be maintained.
This morning's announcement goes some way towards rectifying the declining growth in Ansell's industrial gloves division. Its success in Hyflex has drawn other manufacturers into the arena, who have aggressively copied the range.
Ansell has been hindered by a shortage of manufacturing capacity which and the Midas acquisition should alleviate some of those problems.
But the global outlook for Ansell products remains weak with no growth expected in Europe and slower growth in Asia offsetting improvements in North and Latin America.
Success this year will depend on how seamlessly it can integrate its acquisitions.