Reporting season: Ansell axed by tax

Reporting season has kicked off in earnest. JB Hi-Fi reported a stellar profit result but Ansell deserves the wooden spoon (or should that be the rubber glove?). Reporting season is a time of contrasts. Some companies, such as JB Hi-Fi (ASX: JBH), produce excellent results and make you wonder if you’ve under-estimated the strength of the business. Others contain time bombs lurking within them – like Ansell (ASX: ANN). It’s a reasonable quality business, and one that piqued my interest a few years ago (see Ansell: Flowers in the desert from August 2012). After that the stock went on a tear and the opportunity to buy disappeared. One thing that concerned me then, though, was Ansell’s low income tax expense. It represented just 8% of pre-tax profit in 2012 (compared to the Australian corporate tax rate of 30%). Without doing a full analysis, I presumed this resulted partly from tax losses generated during its time as Pacific Dunlop. (VIEW LINK)