Comvita Limited · NZX:CVT
Comvita — Shareholder Meeting (October 2020)
82 slides from Comvita's shareholder meeting presentation, Oct 22, 2020
Slide 1: Annual Shareholder Meeting 2020
ANNUAL SHAREHOLDER MEETING 2020 22 October 2020
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 audited financial statements for the year ended 30 June
Slide 3: Chair Address
CHAIR ADDRESS
Slide 4: Agenda
• Mihi me Karakia Timatanga • Welcome and Apologies | Brett Hewlett • Chair Address | Brett Hewlett • CEO Address | David Banfield Agenda • Reports and Financial Statements Brett Hewlett • Resolution 1: Appointment and Remuneration of Chair Auditors • Resolution 2: Director’s Elections • General Bus
Slide 5: Introductions: Board of Directors
INTRODUCTIONS: BOARD OF DIRECTORS Brett Hewlett Luke Bunt Sarah Kennedy Paul Reid Non-Executive Chair Chair of Audit and Chair of Safety Independent Director Risk Committee and Performance Committee Bob Major Zhu Guangping Cheng Dayong Neil Craig Independent Director Director Director *(retired as C
Slide 6: Introductions: Leadership Team
INTRODUCTIONS: LEADERSHIP TEAM David Banfield Andy Chen Nigel Greenwood Adrian Barr Chief Executive Officer Regional Chief Chief Financial Officer Chief Business Executive Officer Asia Development Officer Dr Jackie Evans Tracy Brown Holly Brown Colin Baskin Chief Science Officer Chief Supply Chain C
Slide 7: Formalities
FORMALITIES • Notice of Meeting • Quorum • Proxies • Health and Safety • Annual Financial statements
Slide 8: COVID-19: A Global Pandemic
COVID-19: A GLOBAL PANDEMIC • This has been an unprecedented year on a global scale • We had to re-think how to remain operational • We had to act selflessly to protect the whole company • We claimed the Government wage subsidy of $104K to retain employment of retail and duty-free staff However • We
Slide 9: Health and Safety
HEALTH AND SAFETY Improved visibility of safety performance Health and Safety
Slide 10: People – Our team at Comvita
People Our team at comvita PEOPLE – Our team at Comvita
Slide 11: People: Governance & Diversity
PEOPLE Governance & Diversity YOUR BOARD YOUR LEADERSHIP TEAM AVERAGE LENGTH OF SERVICE: AVERAGE LENGTH OF SERVICE: 3 YEARS* 3 YEARS, 10 MONTHS *from date of formal election
Slide 12: Our Team Goals Looking Forward
OUR TEAM GOALS Looking Forward
Slide 13: Launching our Beekeeping Apprentice Programme
PEOPLE Launching our Beekeeping Apprentice Programme
Slide 14: Environment
OUR PLANET Goal: Carbon positive by 2030 Environment
Slide 15: Partnership: Supporting Biodiversity and Wildlife
PARTNERSHIP Supporting Biodiversity and Wildlife
Slide 16: FY 2020 in Summary
FY 2020 IN SUMMARY As forecast, this was a year to stabilise, reset and refocus. While there’s no question the results for the first half were disappointing, we saw real progress and momentum in the second half.
Slide 17: FY 2020 in Review
FY 2020 IN REVIEW 30 June 30 June vs vs 2020 2019 Last Year Last Year $'000 $'000 % Revenue 195,912 171,104 24,808 14.5% Gross margin 49.0% 37.3% 11.7% 1170bps Operating expenses 96,398 73,548 22,850 311% Operating expenses excl. China 72,034 71,423 611 09% Underlying EBITDA* 19,086 Oo 19,086 100.0%
Slide 18: FY 2020 Review
FY 2020 REVIEW oS STRONG TOP AND BOTTOM LINE GROWTH IN FOCUS GROWTH MARKETS, CHINA AND NORTH AMERICA "% pan 30. | (s 275. CAPITAL RAISE COMPLETED CASH GENERATED IN JUNE TO PAY DOWN DEBT ) YEAR-END NET DEBT $15.5m VERSUS $93m \__INPECEMBE DECEMBER I 14.5. § REVENUE GROWTH
Slide 19: FY 2020 Review
e LOW-RISK HONEY HARVEST CAPITAL STRUCTURE MODEL IMPLEMENTED RESET SIGNIFICANT SIMPLIFICATION OF TOTAL ORGANISATION — ORGANISATION RESTRUCTURE COMPLETE (COSTS IN FY20) NEW BANK FACILITIES AGREED TO JUNE 2022 REDUCTION OF RISK
Slide 20: Our Strategic Pillars
OUR STRATEGIC PILLARS • Unrelenting focus on our consumers and execution • World class digital engagement and experience • Unrelenting focus on science and quality • Unrelenting focus on simplification, cost, and efficiency • Unrelenting focus on sustainability and creating a world class organisatio
Slide 21: Leveraging Our Unique Business Model
LEVERAGING OUR UNIQUE BUSINESS MODEL
Slide 22: CEO Address - David Banfield
CEO ADDRESS FY20 Financial Results • Company • Products • Markets CEO 3 Point plan Address • Focus • Strategy - David Banfield Building Resilience and growth • Winning in China • Digital • NPD – Premium reserve Trading Update Q1
Slide 23: New beginnings are often disguised as painful endings
New beginnings are often disguised as painful endings Lao Tzu 400bc
Slide 24: Year in Review - Covid-19
YEAR IN REVIEW - Covid-19 • Living in unprecedented times • Our Primary goals • Safety of our team • Being part of the solution • Thank our team for the way they responded in all departments, in all markets • Commercially had a positive impact on results • Consumers turned to Natural Health products
Slide 25: Impact of Coronavirus on Performance
IMPACT OF CORONAVIRUS ON PERFORMANCE Summary Positive trading during the Covid-19 period as consumers look to purchase natural health products POSITIVE IMPACTS $20M NEGATIVE IMPACTS $12M • China, Asia, CBEC, North America and EMEA revenue • AU/NZ and Hong Kong revenue decline = $12M growth year on y
Slide 26: Our Three Point Plan
OUR THREE POINT PLAN 1. Stabilise the organisation • Winning in AU/ NZ • Focus on fundamentals • Relentless simplification • Positive cashflow paying down debt • Inventory management • Underperforming assets 2. Transformed organisation • Consumer focus • New harvest model • Agile focused team • $15M
Slide 27: Full Year - Headlines
FULL YEAR - Headlines • Revenue growth 14.5% • Strong top and bottom-line growth in focus growth markets o China +11% sales, +60% contribution o North America +66% sales, +196% contribution • Full year EBITDA $4.2M • Year-end underlying EBITDA* $19.1M o H2 $18.4M • NPAT ($9.7M) o Impact of one-off n
Slide 28: Financial Summary
FINANCIAL SUMMARY The last six months have shown that our turnaround and transformation are on track.
Slide 29: Significant Reduction in Debt and Inventory
SIGNIFICANT REDUCTION IN DEBT AND INVENTORY • Inventory reduced by $20M • Net debt decrease of $73M vs 30 June 2019 due to successful capital raise $50M and working capital improvements $23M • $27.5M Cash generated to pay down debt • Banking facility extended to July 2022
Slide 30: Full Year Share of Revenue by Product Category
FULL YEAR SHARE OF REVENUE BY PRODUCT CATEGORY
Slide 31: Our Market Segments
OUR MARKET SEGMENTS
Slide 32: Good Performance in Focus Growth Markets
GOOD PERFORMANCE IN FOCUS GROWTH MARKETS • Strong double digit top and bottom-line growth China and North America • Fastest growing Mānuka Honey brand North America • Strong growth in Rest of Asia • EMEA – Top line growth but unprofitable • NZ AU impacted by Covid-19 disruption to Diagou channel
Slide 33: FY 20 Summary
FY 20 SUMMARY We have completed substantial changes to the business structure, we emerge from FY20 more focused, more agile, more resilient. We are in the process of ‘Building a better Business’
Slide 34: A Man Who Chases Two Rabbits Catches Neither
A MAN WHO CHASES TWO RABBITS CATCHES NEITHER - Chinese Proverb -
Slide 35: Arotahi: Our Focus
AROTAHI OUR FOCUS = LONG-TERM PROFITABLE GROWTH
Slide 36: Building Customer Intimacy
-* @ BUILDING CUSTOMER INTIMACY CUSTOMER INTIMACY PRODUCT LEADERSHIP OPERATIONAL EXCELLENCE
Slide 37: Our Three Point Plan: Progress and Update
OUR THREE POINT PLAN Progress and Update 1. Stabilise the organisation • Reset AU/ NZ • Positive cashflow paying down debt • Reduced Inventory • Underperforming assets 2. Transformed organisation • Consumer focus • New harvest model • Leverage market leading position in China • Leadership talent 3.
Slide 38: Stabilise Performance
STABILISE PERFORMANCE What’s Happened? Legislative changes Poor honey harvest Covid-19 impacts Loss of focus The Way Forward Focus markets Focus products Focus consumers Reset Capital structure Progress So Far Reduced debt Reduced underlying costs 6 consecutive profitable months Key achievements New
Slide 39: Transformation
TRANSFORMATION What Must Change Unrelenting consumer focus Enhanced digital capability and engagement Enhanced focus on cash and efficiency What We Are Doing About It Consumer focused China and North America focused New capital structure Flat structure Progress So Far US growth 66% China growth 11%
Slide 40: Long Term Resilience and Growth
LONG TERM RESILIENCE AND GROWTH Longer term pressures on the business More competition due to digital Driving household penetration Driving frequency of use Competition for talent Actions and Innovations, we are putting in place Clear Brand Value Proposition Brand Investment model Science at the hea
Slide 41: Transformation at Comvita
TRANSFORMATION AT COMVITA FROM TO Complex organisation Simplified and sharper focus Multiple strategies Simple things exceptionally well Multiple geographies Prioritised markets Reactive Proactive Variable supply chain Highest quality, lowest cost supply Efficient producer Most efficient economicall
Slide 42: It's vital that as we transform the business, we retain...
It's vital that as we transform the business, we retain and celebrate what's made us the Global market leader we are today. 42
Slide 43: Building on Our Proud History
BUILDING ON OUR PROUD HISTORY
Slide 44: Our Strategic Beliefs
OUR STRATEGIC BELIEFS • Success in China is key to delivering long- term stakeholder value • Digital leadership is a critical success factor for Comvita • Mānuka honey (and Mānuka honey products) will be our main source of revenue and margin for the next 10+ years • An aligned, sustainable, competit
Slide 45: Our Strategic Pillars
OUR STRATEGIC PILLARS • Unrelenting focus on our consumers • World class digital engagement and experience • Unrelenting focus on science and quality • Unrelenting focus on simplification, cost, and efficiency • Unrelenting focus on sustainability and creating a world class organisation
Slide 46: Our Strategic Focus
OUR STRATEGIC FOCUS 1. Build a China market business capable of delivering 10 years of 10% CAGR 2. Provide geographical balance by delivering breakthrough in North America 3. 50% of total sales to be delivered by digital channels 4. Leverage Comvita’s unique business model to deliver above average r
Slide 47: China Market
CHINA MARKET 47
Slide 48: China Market Growth
CHINA MARKET GROWTH • Biggest Honey market in the world 8.3BN RMB ($1.8BN NZD) • Imported honey makes up around 12% of total market • Chinese consumers using honey as a medicine for thousands of years • Comvita are strong market leader in Mānuka honey in China • Wholly owned Subsidiary • Over 200 te
Slide 49: China – Growing the Market and Our Share
CHINA – GROWING THE MARKET AND OUR SHARE Total Market $1.8Bn TODAY Imported Honey Imported Honey Imported Honey Market Share Market Share Market Share 12% 15% 20% 12% TAM 15% TAM 20% TAM = NZD$216M = NZD$270M = NZD$360M
Slide 50: Winning in China
WINNING | IN CHINA <'
Slide 51: The Path to Sustainable Growth
THE PATH TO SUSTAINABLE GROWTH Comprehensive Strategies NOW FUTURE
Slide 52: We Know Our Consumers
WE KNOW OUR CONSUMERS OFFLINE ECOMMERCE
Slide 53: Redefining Our Target Consumer
REDEFINING OUR TARGET CONSUMER • Consumer demographics • Demographic size • Media consumption Traffic, awareness, enlightenment, conversion • Shopper habits • Social influences • Their needs (product and brand) • Creating moments of escape
Slide 54: Size of Prize and Life Stage
SIZE OF PRIZE AND LIFE STAGE COMVITA TARGET CONSUMERS TODAY
Slide 55: How to Connect
HOW TO CONNECT Three Elements to Generate Customer Engagement with Advocacy 1. Provide great products 2. Understand consumer needs 3. Create a sense of belonging
Slide 56: Connected Through Hearts, One Step Further
CONNECTED THROUGH HEARTS, ONE STEP FURTHER
Slide 57: Accelerating Digital Leadership
ACCELERATING DIGITAL LEADERSHIP
Slide 58: Accelerating Digital Leadership
ACCELERATING DIGITAL LEADERSHIP
Slide 59: Accelerating Digital Leadership
ACCELERATING DIGITAL LEADERSHIP
Slide 60: Accelerating Digital Leadership
ACCELERATING DIGITAL LEADERSHIP
Slide 61: Mānuka Honey 25+ Special Reserve
25+ SPECIAL RESERVE MĀNUKA HONEY
Slide 62: Our Winning Model
OUR WINNING MODEL We aim to have an unrelenting focus on: • Consumers and execution • World class digital engagement and experience • Science and quality • Simplification, cost, and efficiency; and • Sustainability and creating a world class organisation
Slide 63: Strong Q1 Performance
STRONG Q1 PERFORMANCE • Strong start to the year • Double digit revenue growth • Strong GP margins • Costs in line with expectations • Brand investment increase to support differentiated model • Trading profitably • Nine consecutive profitable months • Focused on delivering FY21 results • Reducing I
Slide 64: Full Year Guidance Maintained
FULL YEAR GUIDANCE MAINTAINED
Slide 65: We pioneered the Mānuka Honey industry 50 years ago
We pioneered the Mānuka Honey industry 50 years ago. As we chart the course for the next 50 years, we looked to our beginnings to rediscover the timeless qualities that have got us to where we are today.
Slide 66: Our story began with an unlikely partnership
Our story began with an unlikely partnership; Alan and Claude – generations apart, worldly & progressive in their thinking.
Slide 67: United by a belief
United by a belief; That food is the best medicine. And that nature has the answers.
Slide 68: With deep principles that were well ahead of their time
With deep principles that were well ahead of their time; A belief in community and caring for one another. Deep respect for nature and the environment. Not just for New Zealand’s benefit. But for the world. Always These principles seeking remain central to and sharing the Comvita brand nearly 50 yea
Slide 69: At the time they were regarded as rebels
At the time they were regarded as rebels, mavericks even crazies. They believed that Mānuka, considered near worthless at the time, had powerful health properties. They sensed a magic lay within this honey from New Zealand and the hive itself. And though it couldn’t be explained by science at the ti
Slide 70: With the benefit of history, they are seen as pioneers
With the benefit of history, they are seen as pioneers.
Slide 71: The world has increasingly come round to Alan and Claude's way of thinking
The world has increasingly come round to Alan and Claude’s way of thinking. They see a healing wisdom in nature that makes sense in a world out of balance. People the world over, are looking for a natural answer to support their health. Many of us live in population dense, unrelenting cities – the e
Slide 72: And our science is now revealing nature's secrets
And our science is now revealing nature’s secrets. Every day we’re learning more and more about the extraordinary powers of the Mānuka tree, honey and the wondrous bee. We lead the industry in investment in science and will continue to do so.
Slide 73: We work in harmony with nature
We work in harmony with nature – seeking to understand. Never to alter. This partnership of nature and science is the Comvita difference. It’s what sets Comvita apart from the rest. And makes Comvita the world’s leading bee products company.
Slide 74: There's still more to learn, and more to share
There’s still more to learn, and more to share, but the giant steps we’ve already taken and the lives we’ve touched, fuel the passion to keep going. We pioneered the industry nearly fifty years ago. We look forward with excitement to pioneering the next fifty years.
Slide 75: Comvita. This is our story.
Comvita. This is our story.
Slide 76: Resolutions
Vv) Zz 2 - =) = O VY) Lu ~
Slide 77: Resolutions
RESOLUTIONS Formalities • Reports and Financial Statements Ordinary Resolutions Agenda 1. Appointment and Remuneration of Auditors Brett Hewlett 2. Director’s Elections: Chair • Re-elect Mr. Brett Hewlett
Slide 78: Resolution: Appointment and Remuneration of Auditors
RESOLUTION 1 Appointment and Remuneration of Auditors To consider, and if thought fit to pass, the following ordinary resolution: Agenda Brett Hewlett “That the meeting record the re-appointment of KPMG as Chair the auditors of the Company for the current financial year ending 30 June 2021 pursuant
Slide 79: Resolution 2: Director's Election
RESOLUTION 2 Director’s Election To consider, and if thought fit to pass, the following ordinary resolution: “That Brett Hewlett, who retires by rotation and is eligible for re-election, be re-elected as a Director of the Company.”
Slide 80: Resolution 2: Director's Election
RESOLUTION 2 Director’s Election Brett is a professional director and consultant. Other former Governance and Advisory Board roles include: Derma Sciences Inc. (DSCI:Nasdaq), SeaDragon (SEA:NZX), Enterprise Angels, NZTE’s Better by Design Advisory Board and Member of the Callaghan Innovation Stakeho
Slide 81: General Business, Questions, Acknowledgements
General Business Questions Acknowledgements
Slide 82: Thank You
THANK YOU