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Haemonetics Corporation

HAE: NASDAQ

Haemonetics Corporation (HAE) provides products for processing, handling and analyzing blood for each facet of the blood supply chain. Its products and services ensure that patients receive the most appropriate treatment at the right time. [1] The company was founded in 1971 and is based in Braintree, MA. [2]

Investment thesis

Anchor has followed Haemonetics for over five years and always liked the business as it is a leader in blood management and provides products that are vital to the blood supply chain. The balance sheet appears to us to be under-utilized as it has just $140M in net debt. [3] A new management team is in place and has laid out a multi-year turnaround plan, which will address productivity and organic growth. [4] As a result it hopes to achieve number one or two market positions in each segment and deliver superior returns on invested capital (ROIC). [5]

Confirmation through research

The growth outlook appears favorable for Haemonetics given attractive market fundamentals and the opportunity for more efficient use of resources. [6] Haemonetics is the only company that offers a full blood management solution, including tracking and managing blood, and the company’s products provide a very clear cost and productivity benefit to its users. [7] Haemonetics has been fighting a number of operational headwinds the last couple of years, including foreign exchange, as 43% of revenues are generated outside the U.S., a change in the number of calendar weeks, and continued declines in blood transfusions. [8]

Chris Simon, CEO, and Bill Burke, CFO, joined the company in May and August of 2016. [9] Previously, Chris led the Global Medical Products Practice at McKinsey and Bill most recently led the integration of Covidien into Medtronic. [10] Anchor believes that a strong management team is important and after spending a half day with management at the company’s headquarters, we feel that these two can achieve or even exceed the company’s turnaround plan goals, which include right sizing the business and driving growth in the high potential Plasma and Hospital segments. [11]

Variant Perception

We believe that there is additional upside beyond management’s goals. We see an opportunity for natural add-ons in the critical information space, the possibility of an expanding addressable market for devices and the option to sell less attractive segments of the business. We believe that Haemonetics is a compelling investment opportunity right now with a new management team that we expect to drive above average returns over the next several years.