Comvita Limited · NZX:CVT
Comvita — H1 FY2023 Earnings Presentation
46 slides from Comvita's earnings presentation, Feb 23, 2023
Slide 1: Investor Presentation Half Year Result FY23
PRESENTED BY: INVESTOR PRESENTATION David Banfield, CEO HALF YEAR RESULT FY23 Nigel Greenwood, CFO 23 February 2023
Slide 2: Notice
I M P O R TA N T Notice This presentation is given on behalf entities. They should not be used in substitution • Includes statements relating to past of Comvita Limited. Information in for, or isolation of, Comvita’s audited financial performance, which should not be regarded as this presentation: s
Slide 3: Cyclone Gabrielle
Cyclone Gabrielle • Our thoughts are with everyone across New Zealand impacted by Cyclone Gabrielle and especially our team in the Hawkes Bay region. Earlier this week our CEO and Chief Operations Officer (COO) visited our team and facility in Hawkes Bay to assess the impact of Cyclone Gabrielle fir
Slide 4: Mainland China market re-opening
Mainland China market re-opening • Market reopened on December 5th 2022 • A number of team members contracted Covid though experienced mild symptoms and are all well and back at work post Chinese New Year (CNY) • Strong demand in all channels following re-opening however c$1-2M unfulfilled orders du
Slide 5: Strong and resilient performance
HY23 Strong and resilient performance D E L I V E R E D D E S P I T E M AT E R I A L F X H E A D W I N D Number one Six Record revenue Record gross profit (GP) global brand leader $112M +7% 61.9% +530bps Gaining market share in key markets Consecutive reporting periods Record revenue +$7.2M On track
Slide 6: Financial key results: income statement
K E Y R E S U LT S Financial I N C O M E S TAT E M E N T For the six months ended 31 December 31 December NZD 000s 2022 2021 Variance $ Variance % • Record revenue of $112M +7% vs PCP Revenue 112,130 104,942 7,188 6.8% • Digital share of revenue 39% at accretive margins Gross profit 69,380 59,400 9,
Slide 7: Momentum continues to build
Momentum continues to build Gross profit Operating profit For the 6 months ending For the 6 months ending 80.0 15.0 11.6 • Gross profit increased +94% to $69.4M from 69.4 59.4 10.0 7.2 $35.8M in December 2019. CAGR of 25% NZD (millions) NZD (millions) 60.0 5.2 48.5 5.0 35.8 • Operating profit increa
Slide 8: 2025 plan on track c$50M EBITDA
SECTION 1 2025 plan on track c$50M EBITDA 8
Slide 9: Clarity of focus and progress to 2025
FOCUSSED Clarity of focus and progress TO 2025 C O M V I TA I N V E S T O R P R E S E N TAT I O N H A L F Y E A R R E S U LT F Y 2 3 9
Slide 10: Our business model 60:15:20
Our business model 60:15:20 • Targeting a minimum of 60% GP Minimum 60% gross profit • GP improved to 62% with this result • Full year expected at c59% • Planning to invest 15% in long term brand building activity 15% marketing investment to sales ratio • H1 FY23 marketing investment 13.8% 20% EBITD
Slide 11: Targeting $50M (20%) EBITDA
COMVITA 2025 Targeting Minimum 15% marketing 20% EBITDA 50% $50M EBITDA 60% gross investment to sales leverage ratio digital sales by 2025 profit ratio target 1–1.5 KPIS FY25 ALIGNED FOCUS – DELIVER BY FY25 Build a China market business capable Carbon-neutral 2025 and science-based targets for Targe
Slide 12: On track to deliver on our plan
ON TRACK TO DELIVER ON OUR PLAN 60:15:20 plan 2025 ( R AT I O S ) HEADLINES 12.0% • Strong margin improvement +530bps vs PCP to 61.9% 61.9% GROSS PROFIT 13.8% EBITDA* % OF SALES +50BPS • 13.8% marketing investment +120bps vs PCP • 12.0% EDITDA +50bps vs PCP • 14% adjusted EBITDA when removing all tr
Slide 13: Delivering environmental and social impact
SECTION 2 Delivering environmental and social impact 13
Slide 14: Harmony Plan highlights
Harmony Plan highlights 1 Climate action 2 Bee welfare & advocacy • Inaugural ‘Interim Report’ Scope 1 and 2 • 246 hives rescued during 2022, resulting in inventory developed to support carbon the saving of over 12.3 million bees. reduction strategy. • Comvita Bee Welfare Code rolled out • 63T metal
Slide 15: Using bees and beekeeping to support people and wildlife in Kenya
Using Bees and Beekeeping to support people and wildlife in Kenya, training local Masai tribe how to keep bees for sustenance and funding education for Masai women Carlos Zevallos, Head of Apiculture Development NZ, providing on-the-ground Apiary training in Kenya 15
Slide 16: Safety and wellbeing
PERFORMANCE VS PCP Safety and 2.9 1.5 wellbeing TRIFR -10% vs FY22 (3.2) LTIFR Flat on FY22 1 J U LY 2 0 2 2 – 31 DECEMBER 2022 + 14.8 % -2 % 1 + 35 % NEAR MISS REPORTABLE INJURIES MVIFR INDIVIDUAL WELLBEING REPORTING CHECKS NZ FY22 +4% FY22 –41% FY22 0.9 +10% FY22 NEW C O M V I TA I N V E S T O R P
Slide 17: Whānau
GLOBAL Whānau 552 5 + 62% FU L L T I M E E QU I V AL E NT AV E R AG E E M P L O Y E E O F O U R G L O B AL T E AM R O L E S I N O U R G L O B AL Y E AR S O F SE R V I C E I S FE M AL E W H ĀNAU G L O B AL L Y 37% 40 % 73% W O M E N I N L E AD E R SH I P O F R O L E S AR E FI L L E D B Y AP P R E NT
Slide 18: Climate action performance
S U S TA I N A B I L I T Y F Y 2 3 H A L F Y E A R Climate action performance 774 T CO2e GHG H1 INVENTORY SCOPES 1 & 2 4,748 T CO2e CARBON REMOVALS FROM 55,591 T CO2e CARBON STOCKS SINCE MĀNUKA MĀNUKA FORESTS H1 FOREST ESTABLISHMENT 2022 H1: 652 T CO2e 2022 H1: 3,013 T CO2e 2022 END OF YEAR: 35,840
Slide 19: Half year results FY23
SECTION 3 Half year results FY23 19
Slide 20: Strong performance
DELIVERING ON OUR PLAN Strong performance (NUMBERS) HEADLINES • Record operating profit $11.6M +4.4M and +61% vs PCP • Record EBITDA $13.4M +1.3M and +11% vs PCP 11.6M 13.4M $4.2M • Record NPAT $4.2M +19% vs PCP • Record revenue $112M +7% vs PCP $ $ • Record GP $69.4M +530bps vs PCP REPORTED EBITDA
Slide 21: Gross profit
Gross profit improved $10.0M from focus growth markets, Mānuka honey, digital channel and productivity gains. • Focus growth markets: Strong performance in North America with Greater China maintaining growth, despite Covid lockdown headwinds • Strong growth in monofloral Mānuka honey • Digital chann
Slide 22: Foreign exchange
Foreign exchange EBITDA FX adjusted2 (NZ$’m) Revenue by currency1 • Weaker NZD caused an H1 FX loss of $3.5M, of which 1.2 $2.2M was realised in relation to hedging 2.2 (0.6) • There was $1.2M of unrealised translation losses 30% 37% • Adjusting for FX impacts, H1 EBITDA at $16.3M2 or +35% vs PCP 16
Slide 23: Financial key results: balance sheet
K E Y R E S U LT S Financial BALANCE SHEET As at • Net debt increased by $38M since 30 June 22. Due to operating 31 December 31 December 30 June NZD 000s cash outflows of $20.7M, investing activities (capital expenditure) 2022 2021 2022 of $11.9M and dividend payments of $2.2M Unaudited Unaudited Au
Slide 24: Inventory
Inventory PROFILE As at 31 December 31 December 30 June • Inventory increased by $13.7M vs 30 June 22 NZD 000s 2022 2021 2022 • Raw materials increased by $12.4M related to prior Unaudited Unaudited Audited commitments associated with expired and no longer renewed supplier contracts Raw materials 89
Slide 25: Supply & demand: balancing
Ongoing optimisation of inventory and supply strategy since 2020 Stage one • Harvest breakeven contribution model launched in 2020 and proven in 2021 and 2022 • Historical supply model 30.60.10 BALANCING − 30% from own supply and JVs, 60% from supply partner group, 10% from open market • For supply
Slide 26: New supply model
BALANCING So what? New • Still forecasting year end inventory materially flat vs PCP c$135M* • For FY24 we will see a material reduction in inventory* and associated benefit to cashflow • For FY25 we will see a further material reduction in inventory in line with our 2025 plan of inventory at supply
Slide 27: Harvest update
Harvest update 2023 • Too early to give fulsome update on harvest performance • Harvest has been severely impacted by weather events we have all experienced across Dec, Jan and Feb • Initial flowering had been delayed by around 4 weeks • Expect to understand quality and volume of harvest around Apri
Slide 28: Capital expenditure
Capital EXPENDITURE 31 December 31 December Continued investment in our Mānuka forest strategy As at 2022 2021 • The substantive benefits of our investments in forests NZD 000s Unaudited Unaudited are expected to deliver from FY27 onwards. Includes $4.0M land purchase Mānuka forest land purchase and
Slide 29: Upgrading our ERP system
Upgrading • Our internal digital transformation program is now focused on updating our ERP system, redefining internal inefficient processes and refreshing master data our ERP • This project will run until June 2024 and is designed to give up to date scalable internal systems and processes and signi
Slide 30: Interim dividend
INTERIM • Fully imputed interim dividend of 2.5cps Dividend − Record date of 7th April 2023 and payment date of 28th April 2023 • Inline with PCP C O M V I TA I N V E S T O R P R E S E N TAT I O N H A L F Y E A R R E S U LT F Y 2 3 30
Slide 31: Enhancing scientific understanding
SECTION 6 Enhancing scientific understanding 31
Slide 32: Science and IP
FURTHER INVESTMENT IN Science and IP C O M V I TA L A B O R AT O R I E S E s t . 1974 Industry leading in clinical Industry leading trials Mānuka honey for digestive health $ 1.3M lab testing standards 190,249 lab results in H1 FY23 + 9% enrollment commenced (H1 FY22: 174,380) vs. PCP (HVN National
Slide 33: Market segments: growing share in focus markets
SECTION 7 Market segments: Growing share in focus markets 33
Slide 34: Market headlines
MARKET HEADLINES • Record revenue and margin − Revenue $112M +7% − Gross profit 61.9% +530bps • Greater China +9% revenue, net contribution $13.1M +15% − Very strong performance in Hong Kong SAR (top and bottom-line), est $1-2M from MARKET China consumers • Mainland China sales +3%, net contribution
Slide 35: Greater China
GREATER CHINA ON A REPORTED CURRENCY BASIS – FOR 6 MONTHS ENDED DEC 22 This year Last year Vs. Vs. NZD 000s Dec 22 Dec 21 last year Last year % Sales 51,916 47,740 4,176 9% Net contribution 13,066 11,349 1,717 15% Net contribution % 25% 24% • Revenue +9% despite material Covid headwinds across the r
Slide 36: Mainland China
MAINLAND CHINA ON A REPORTED CURRENCY BASIS – FOR 6 MONTHS ENDED DEC 22 This year Last year Vs. Vs. NZD 000s Dec 22 Dec 21 last year Last year % Sales 41,261 39,984 1,277 3% Net contribution 10,192 10,016 176 2% Net contribution % 25% 25% • Sales revenue +3% under the challenging market environment
Slide 37: North America
NORTH AMERICA ON A REPORTED CURRENCY BASIS – FOR 6 MONTHS ENDED DEC 22 This year Last year Vs. Vs. NZD 000s Dec 22 Dec 21 last year Last year % Sales 20,699 17,178 3,521 20% Net contribution 6,977 4,979 1,998 40% Net contribution % 34% 29% • Revenue up 20% in world's largest Mānuka honey market by v
Slide 38: Rest of Asia
REST OF ASIA ON A REPORTED CURRENCY BASIS – FOR 6 MONTHS ENDED DEC 22 This year Last year Vs. Vs. NZD 000s Dec 22 Dec 21 last year Last year % Sales 12,925 12,698 227 2% Net contribution 3,314 3,075 239 8% Net contribution % 26% 24% • Total sales +2% • Japan stabilising (top and bottom-line) – now s
Slide 39: Australia & New Zealand
AUSTRALIA & NEW ZEALAND ON A REPORTED CURRENCY BASIS – FOR 6 MONTHS ENDED DEC 22 This year Last year Vs. Vs. NZD 000s Dec 22 Dec 21 last year Last year % Sales 18,074 18,061 13 0% Net contribution 6,326 5,099 1,227 24% Net contribution % 35% 28% • ANZ segment revenue flat vs PCP • Very strong growth
Slide 40: Europe, Middle East & Africa (EMEA)
EUROPE, MIDDLE EAST & AFRICA (EMEA) ON A REPORTED CURRENCY BASIS – FOR 6 MONTHS ENDED DEC 22 This year Last year Vs. Vs. NZD 000s Dec 22 Dec 21 last year Last year % Sales 2,530 2,900 (370) (13%) Net contribution 7 202 (195) (96%) Net contribution % 0% 7% • Revenue -13%, direct to consumer revenue +
Slide 41: E-commerce to be 50% of sales
ON TRACK FOR E-commerce to be 50% of sales BY FY25 HEADLINES • Strongest digital earnings and share of revenue in the history of 42.8M Comvita, with digital share of net group revenue to 38.8% +580bps vs 230BPS 38.8% PCP $ + • $42.8M digital sales globally +15% vs PCP at accretive margins +230bps RE
Slide 42: Summary
SECTION 8 Summary 42
Slide 43: Guidance Summary
Guidance Summary FY23 • Forecasting double-digit growth of normalised EBITDA − ERP investment to be normalised (est c$3M) • Assuming a return to strong growth in China in H2 • Profitable top and bottom-line growth in focus growth markets, channels and categories • E-commerce share greater than 40% •
Slide 44: Summary
Summary Summary • Record revenue of $112M +7.0% − Growing market share in focus growth markets • Record margin of 61.9% +530bps • Record investment in our brand for future growth $15.5M +2.2M vs PCP • Record operating profit $11.6M +61% vs PCP • Record EBITDA of $13.4M +11% vs PCP • Record NPAT $4.2
Slide 45: Q&A
SECTION 9 Q&A
Slide 46: Thank you
THANK YOU COM VITA.COM