Comvita Limited · NZX:CVT
Comvita — H1 FY2019 Earnings Presentation
33 slides from Comvita's earnings presentation, February 2019
Slide 1: Investor Presentation Half Year FY19
INVESTOR PRESENTATION HALF YEAR FY19 FEBRUARY 2019 CHIEF EXECUTIVE OFFICER, SCOTT COULTER, 021 386 988 | CHIEF COMMERCIAL OFFICER, MARK SADD, 027 707 9698
Slide 2: Important Notice
IMPORTANT NOTICE This presentation is given on behalf of Comvita Limited. Information in this presentation: • Should be read in conjunction with, and is subject to, Comvita’s Annual Reports, Interim Reports and market releases on NZX; • Is from unaudited interim reports for the six months ended 31 D
Slide 3: Overview
OVERVIEW • H1 FY19 results • Sales and Markets • Honey Harvest Update • Debt and Inventory • Cashflow • Strategy and FY19 Outlook 3
Slide 4: H1 FY19 Results
H1 FY19 RESULTS 4
Slide 5: Half Year in Review
HALF YEAR IN REVIEW TOTAL REVENUE $ $78m $101m - consolidated view of sales including the China JV* NPAT - LOSS OF $ $2.7m INSIDE CHINA GROWTH (slide 14-15) $ Sales $26m, +13%, Gross Margin +27% POSITIVE OPERATING CASHFLOW (slide 21) $ $6.3m Figures are based on unaudited results to 31 December 2018
Slide 6: Key Financial Results
KEY FINANCIAL RESULTS Financial results for the six months ended 31 December 2018 31 December 2017 unaudited unaudited Total revenue $77.7m $83.6m EBITDA* $1.3m $9.7m Equity earnings $0.8m ($1.1m) Net (loss) / profit after tax - NPAT ($2.7m) $3.7m NPAT attributed to non-operating items $0.7m $0.3m A
Slide 7: Brand & Supply, Operating NPAT
BRAND & SUPPLY, OPERATING NPAT H1 FY19 COMPARED TO H1 FY18 S U P P LY & B R A N D O P E R AT I N G N PAT S P L I T • Brand business does not have the US uplift in H1 FY19 that was in H1 FY18 • Brand impacted as China distribution transitions to a direct model • Supply impacted in H1 FY19 by very poo
Slide 8: Strategic Focus
STRATEGIC FOCUS • Enhance profitability • Grow EBITDA margins through consistent pricing strategy, cost control and productivity gains • Build Manuka honey distribution • Directly into China through our China JV • Evolve distribution to direct relationships with cross-border e-commerce (CBEC) channe
Slide 9: Sales and Markets
SALES AND MARKETS 9
Slide 10: Sales for the Half Year Ended December 2018
SALES FOR THE HALF YEAR ENDED 31 DECEMBER 2018 CHINA (slides 14-15) NORTH AMERICA EUROPE (slides 12-13 ) $3.1m $26m* ASIA $8.1m (2017 : $4.9m) ($3.3m**) $21.2m (2017 : $19.6m) 2017 $23m* (2017 : $16.8m) ($4.6m**) AUSTRALIA / NZ (ANZ) (slide 16) $32.6m (2017 : $32.0 m) Figures are based on unaudited
Slide 11: Understanding the Underlying Trends - Key Markets
UNDERSTANDING THE UNDERLYING TRENDS - KEY MARKETS • Group sales and margins normalised for last years US pipeline fill • China (JV sales inside China) • ANZ – Focus on UMF honey • Brand Strength – a case study 11
Slide 12: Group Sales Normalised for North American Pipeline Fill
GROUP SALES NORMALISED FOR NORTH AMERICAN PIPELINE FILL IN PRIOR YEAR H1 FY19 H1 FY18 Sales North America $8.1m $19.6m • Large North American retailer filled their stores in the first half of FY18 in both the United States and Canada • No sales to this customer in the US since the first half of FY18
Slide 13: North American Distribution
NORTH AMERICAN DISTRIBUTION • Secured one of the top US natural products brokers • Amazon • Sales grew 15% from $2.0 H1 FY18 to $2.3m H1 FY19 • Comvita Kids Elixirs and Soothing Pops • Listed in Whole Foods • Distribution build happening now across other retailers • Sales start in September 2019 (fo
Slide 14: China Strategy
CHINA STRATEGY • Distribution strategy • Targeting growth inside China, online and offline • China brand strength will drive Daigou, cross- border e-commerce and tourism markets • Pricing strategy – lift margins and harmonise pricing between offline and online distribution • Build capability • In e-
Slide 15: China (JV Sales Inside China)
CHINA (JV SALES INSIDE CHINA) • Pricing strategy – lift margins and harmonise pricing between offline and online H1 FY18 to H1 FY19 Sales H1 FY19 Growth Sales $26m + 13% GM$ + 27% GM% + 6.9% • Pricing strategy starting to impact – able to grow and lift margins • Building platform for growth - hired
Slide 16: ANZ UMF Honey Sales - Price and Sales Growth
ANZ UMF HONEY SALES - PRICE AND SALES GROWTH H1 FY18 to H1 FY19 Growth Sales + 29% GM$ + 37% GM% + 3.2% • Pricing strategy - • Lift e-commerce prices inside China to bring them into line with retail prices • Stabilise prices in the wholesale channels through consistent pricing to customers across AN
Slide 17: Brand Strength - UMF Honey Case Study
BRAND STRENGTH - UMF HONEY CASE STUDY LEADING PHARMACY RETAILER Sourced by Aztec data • Market share maintained with key competitor entering the market • Significant price premium and is the dominant brand - Singles day promotion – Comvita secured 93% market share – with pricing similar to competito
Slide 18: Product Segments of Total Revenue
PRODUCT SEGMENTS OF TOTAL REVENUE MEDICAL PERSONAL CARE $2m $4m (2017:$4m) (2017:$2m) 2% 4% HEALTHCARE FUNCTIONAL 23% 71% FOODS $18m $53m (2017:$20m) (2017: $58m) 18 Figures are based on unaudited results to 31 December 2018.
Slide 19: Inventory, Debt and Cashflow
INVENTORY, DEBT AND CASHFLOW 19
Slide 20: Inventory and Debt
INVENTORY AND DEBT • Secure inventory position going into new season - 31 December 2018, $119m 31 31 - 31 December 2017, $99m Key Balance December December Sheet 2018 2017 Ratios unaudited unaudited • Finished goods as at $’000 $’000 - Consistent at $26m Total assets 326,971 296,625 • Service level
Slide 21: Cashflow
CASHFLOW • Operating cash inflow of $6.3m (HY 2018 outflow: $17.4m) 31 31 December December Cash flow 2018 2017 movements unaudited unaudited Movement • Investment activities $17.9m: Operating cash inflow/(outflow) 6,337 (17,409) 23,746 • Capacity building Investing activities (17,911) (4,175) (13,7
Slide 22: HY19 Honey Harvest Update
HY19 HONEY HARVEST UPDATE 22
Slide 23: Honey Season – Game of Two Halves
HONEY SEASON – GAME OF TWO HALVES • Weather and honey harvest prior to Christmas very poor, Northland and East Coast apiaries - below average results • Post Christmas results have been much better • Overall, honey season better than last year - early estimates are for circa 20kg/hive, versus 16kg/hi
Slide 24: Strategy & Outlook
STRATEGY & OUTLOOK 24
Slide 25: Comvita Strategy: #1 in Manuka Honey Globally
COMVITA STRATEGY: #1 in Manuka Honey Globally GROW SUPERIOR SUPPLY BUILD DISTRIBUTION INVEST IN MARKETING • To secure more high • To be available where • So more people know UMF honey our customers prefer and love our brand • Breeding and planting to shop • Use our core of genetically superior • Inc
Slide 26: Grow Superior Supply
GROW SUPERIOR SUPPLY • New partnership with MyFarm • MyFarm provides capital to fund our supply growth • Comvita provides beekeeping expertise and unique Manuka cultivars to provide MyFarm investors an acceptable return • 2000ha of plantations will be planted in FY19 • Daykel Apiaries acquired - top
Slide 27: Building Distribution
BUILDING DISTRIBUTION • USA – Whole Foods listings for kids winter range • Including Whole Foods, our kids range will be distributed in over 1000 stores this winter • China cross-border e-commerce • Built direct links with key platforms Kaola, Tmall global, JD Global • 25% growth for singles day com
Slide 28: Invest in Brand and Marketing
INVEST IN BRAND AND MARKETING • New packaging launching in all key markets • Early sales data looks promising • Rate of sale in Canada (our first launch market) is double that of previous packaging 28
Slide 29: Celebrity Influencer
CELEBRITY INFLUENCER • To build broader Comvita brand awareness, two celebrity partnerships were lined up to create brand visibility and consumer engagements in January 2019. Du Ruoxi Weibo post along with her celebrity Wu Xin Little Red Book video post, introducing • In the week leading to the shop
Slide 30: Outlook – February 2019
OUTLOOK – February 2019 • Brand business • Focus on growing formal channels to China • Making good progress on direct distribution to CBEC • Pricing strategy being implemented, good gains in GM$ and GM% in target channels • New distribution coming on stream in the US and Europe/UK will be upside for
Slide 31: Leadership Team
LEADERSHIP TEAM Scott Coulter Mark Sadd Julianne Keast Saada McNamee Chief Executive Officer Chief Commercial Officer Chief Financial Chief People & Culture Officer - Acting Officer Ben Shaw Simon Pothecary Colin Baskin Chief Marketing Chief Sales Chief Supply Chain Officer Officer Officer 31
Slide 32: Board of Directors
BOARD OF DIRECTORS Neil Craig Luke Bunt Sarah Kennedy Xin Wang Non-Executive Chairman Independent Independent Non-Executive Director Director Director Paul Reid Brett Hewlett Murray Denyer Independent Independent Independent Director Director Director 32
Slide 33: Thank You
THANK YOU