Comvita Limited · NZX:CVT
Comvita — H1 FY2021 Earnings Presentation
53 slides from Comvita's earnings presentation, Feb 25, 2021
Slide 1: Investor Presentation: Half Year Result FY21
INVESTOR PRESENTATION HALF YEAR RESULT FY21 Focus Presented by: David Banfield, CEO Nigel Greenwood, CFO 25 February 2021
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 condensed interim financial statements for th
Slide 3: Agenda
AGENDA • Our Focus • Arotahi • Our Unique Business Model • Why Comvita • Interim Results FY21 • Cashflow, Inventory, and Net Debt • Market Segment Performance • Our Three-point Plan • Q&A 3
Slide 4: Our Cause
Our Cause Working in harmony with bees and nature in New Zealand to heal and protect the world. 4
Slide 5: Arotahi: Our Focus = Long-Term Profitable Growth
AROTAHI OUR FOCUS = LONG-TERM PROFITABLE GROWTH 5
Slide 6: Leveraging Our Unique Business Model
LEVERAGING OUR UNIQUE BUSINESS MODEL 6
Slide 7: COVID-19: The global Comvita whānau
COVID-19 The global Comvita whānau • The world has fundamentally changed as a result of COVID and so have we • Our primary focus has been on the health and wellness of our team around the globe • The team are all safe and well, though some family members have been affected • The team response has be
Slide 8: COVID-19
COVID-19 Balanced distribution markets: offline / online 67% of segment revenue • Markets have all performed well • Balanced distribution has enabled us to fulfill consumer needs • Good brand affinity and recognition of Comvita quality • Growing market share • Differentiated model enables us to pivo
Slide 9: Global Regulatory Framework and Standards
GLOBAL REGULATORY FRAMEWORK AND STANDARDS • Comvita support goal of highest standards for all NZ honey • We have one of the most advanced in-house honey laboratories in the world est. 2012 • We are independently audited by a number of independent external authorities such as Medsafe and the Ministry
Slide 10: Headlines
HEADLINES • Reported NPAT $3.5M vs. ($13M) in PCP • Reported EBITDA $10.6M vs. ($8.8M) in PCP, an improvement of $19.4M • Reported revenue $98.9M +5.4% • Double-digit top and bottom-line growth in focus growth markets • Gross profit +1080 bps +10.8% • Marketing Investment +$2.2M or +25% • $15M busin
Slide 11: Key Financial Results
KEY FINANCIAL RESULTS For the six months ended 31 December 31 December $’000 2020 2019 Variance $ Variance % Unaudited Unaudited Revenue 98,885 93,854 5,031 5.4% Gross Profit 48,500 35,813 12,687 35.4% Gross Margin 49.0% 38.2% 1080bps 28.3% Operating Expenses 45,344 46,902 (1,558) (3.3%) EBITDA 10,5
Slide 12: $15M Transformation Update
$15M TRANSFORMATION UPDATE Very good progress so far: • Strong improvement in $ and % GP in H1 • Forecasting full year GP improvement 6-700 bps versus FY20 full year (excluding impact of harvest) • Underlying cost reduction of $5.0M forecast for full year • Full year investment of $1.5M to deliver t
Slide 13: $10M Transformation Programme Phase Two
$10M TRANSFORMATION PROGRAMME PHASE TWO • Additional $10M transformation plan launched • Commencing in January 2021 • Targeting further 400-450 bps improvement • Targeting further $1.5-$2M underlying cost reduction • Invest an additional $1.5M p.a. to deliver the plan over three years • Targeting co
Slide 14: Cashflow, Inventory, & Net Debt
Cashflow, Inventory, & Net Debt
Slide 15: Cashflow
CASHFLOW 31 Dec 2020 31 Dec 2019 Cash flow movements Unaudited unaudited Movement • Operating cash inflow $9.4M Operating cash inflow 9,429 887 8,542 • Operating cashflow consistent with Investing activities (5,660) (3,030) (2,630) operating profit for six months to Financing activities (5,543) 2,24
Slide 16: Inventory & Net Debt
INVENTORY & NET DEBT 31 Dec 31 Dec 30 June Key Balance Sheet Ratios as at 2020 2019 2020 unaudited unaudited audited $’000 $’000 $'000 • Inventory reduced by $18M vs. 31 December 2019 and $14M vs. 30 June Total assets 282,748 303,970 286,423 2020 Total inventory 98,549 116,139 112,679 • Reduction in
Slide 17: Underlying Earnings Reconciliation
UNDERLYING EARNINGS RECONCILIATION 31 Dec 2020 31 Dec 2019 EBITDA EBITDA Variance $’000 $’000 $’000 Per financial statements 10,595 (8,829) 19,424 • Reported improvement of $19.4M Add back non-operating items: versus PCP Comvita China - release of inventory fair value 3,567 Impairment of equity a
Slide 18: Impact of Honey Harvest on Earnings
Impact Of Honey Harvest On Earnings
Slide 19: Honey Supply Recap
HONEY SUPPLY RECAP New business model implemented Key aims; • Highest quality lowest cost • Reduce downside risk to group performance should there be a poor harvest and build long term shareholder confidence • In good years Apiary will continue to contribute to group profits (c$2-$3M) • In poor harv
Slide 20: Honey Supply 2021
HONEY SUPPLY 2021 Early national crop indicators are mixed • Record warm temperatures through winter followed by intense an La Nina system presented some challenges for the honey season. • Spring and early summer saw variable weather patterns across the country resulting in a slow start • Settled, w
Slide 21: Market Segments
Market Segments
Slide 22: Headlines
HEADLINES • Our business model is unique with our global in market subsidiary team • Closer to customer • Closer to consumer • Faster to act • Primacy of market • Team capability enhanced • Strong growth in focused growth markets • China: Revenue +20% Net Contribution (NC) +28% • North America: Reve
Slide 23: Headlines
HEADLINES Performance Balanced Limited distribution Other distribution markets markets Revenue (NZD) $62.7m $30.6m $5.6m Net Contribution $15.9m $8.0m $0.4m Net Contribution % 25.3% 26.3% 7.4% Performance vs. PCP Revenue +26.1% Revenue -17.8% Revenue -19.8% Net Contribution +64.1% Net Contribution +
Slide 24: Market Segment Performance
Market Segment Performance
Slide 25: Revenue Performance vs. PCP
REVENUE PERFORMANCE vs. PCP (31 December 2020 vs. 31 December 2019) GREATER CHINA $47.6m NORTH AMERICA REST OF ASIA $11.6m EMEA (2019 : $43.8m) $12.6m (2019 : $8.4m) $3.4m +9% (2019 : $8.5m) (2019 : $3.4m) +38% +48% Flat AUSTRALIA & NZ (ANZ) $18.1m (2019 : $22.7m) -20% 25Figures are on a reported NZ
Slide 26: Sales Performance - Constant Currency
SALES PERFORMANCE - CONSTANT CURRENCY 6 Months Performance This Year Last Year vs. vs. Sales (000’s) Dec 2020 Dec 2019 Last Year Last Year % Group NZD 100,196 93,928 6,268 6.7% Greater China CNY 219,818 199,270 20,548 10.3% Rest of Asia NZD 12,766 8,497 4,269 50.2% ANZ NZD 17,992 22,727 (4,735) (20.
Slide 27: Net Contribution Segment Performance vs. PCP
NET CONTRIBUTION SEGMENT PERFORMANCE vs. PCP (31 December 2020 vs. 31 December 2019) GREATER CHINA NORTH AMERICA $11.2m REST OF ASIA $3.0m EMEA (2019 : $7.9m) $3.7m (2019 : $0.9m) $0.1m +42% (2019 : $1.5m) +222% (2019 : Loss $0.9m) +151% AUSTRALIA & NZ (ANZ) $5.8m (2019 : $6.1m) -5% Figures are on a
Slide 28: Focus Growth Markets: China & North America
Focus Growth Markets China & North America Focus Structured long-term Investment to grow both market and market share Current business model: Balanced distribution model
Slide 29: Greater China
GREATER CHINA On a reported currency basis 6 Months Performance This Year Last Year vs. vs. NZD 000's Dec 2020 Dec 2019 Last Year Last Year % Sales 47,615 43,842 3,773 8.6% Net Contribution 11,232 7,884 3,348 42.5% Net Contribution % 23.6% 18.0% 561 bps • Revenue growth 8.6% • Strong performance in
Slide 30: Mainland China
MAINLAND CHINA On a reported currency basis China 6 Months Performance This Year Last Year vs. vs. NZD 000's Dec 2020 Dec 2019 Last Year Last Year % Sales 35,481 29,652 5,829 19.7% Net Contribution 7,525 5,899 1,626 27.6% Net Contribution % 21.2% 19.9% 132 bps • China is the world’s biggest honey ma
Slide 31: North America
NORTH AMERICA On a constant currency basis North America 6 Months Performance This Year Last Year vs. vs. USD 000's Dec 2020 Dec 2019 Last Year Last Year % Sales 7,851 5,497 2,353 42.8% Net Contribution 2,014 638 1,376 215.7% Net Contribution % 25.7% 11.6% 1,405 bps Financial Commentary (USD) • Reve
Slide 32: North America
NORTH AMERICA On a reported currency basis This Year Last Year vs. vs. NZD 000's Dec 2020 Dec 2019 Last Year Last Year % Sales 11,617 8,414 3,203 38.1% Net Contribution 3,031 941 2,090 222.2% Net Contribution % 26.1% 11.2% 1,491 bps Net Contribution is a non-GAAP measure. We monitor this as a key pe
Slide 33: North America Market Highlights
NORTH AMERICA Market Highlights • Comvita is the fastest growing Mānuka honey brand in the U.S., in both conventional and natural channels, based on sell out data • Increasing rates of sale per point of distribution with key retail customers for Mānuka, with solid orders committed through balance of
Slide 34: Rest of Asia
REST OF ASIA JAPAN, KOREA, SEA Focus Self funding profitable growth Current business model: Balanced distribution model
Slide 35: Rest of Asia: Second Biggest Region
REST OF ASIA SECOND BIGGEST REGION On a reported currency basis Rest of Asia 6 Months Performance This Year Last Year vs. vs. NZD 000's Dec 2020 Dec 2019 Last Year Last Year % Sales 12,572 8,496 4,076 48.0% Net Contribution 3,747 1,494 2,253 150.8% Net Contribution % 29.8% 17.6% 1,222 bps • Total re
Slide 36: ANZ Performance
ANZ Performance Australia & New Zealand Focus Building domestic strength Current Business model; Narrow distribution model
Slide 37: Australia & New Zealand
AUSTRALIA & NEW ZEALAND On a constant currency basis ANZ 6 Months Performance This Year Last Year vs. vs. NZD 000's Dec 2020 Dec 2019 Last Year Last Year % Sales 17,992 22,726 (4,734) (20.8%) Net Contribution 5,759 6,071 (312) (5.1%) Net Contribution % 32.0% 26.7% 530 bps New Zealand Australia • NZ
Slide 38: Australia & New Zealand
AUSTRALIA & NEW ZEALAND On a reported currency basis ANZ 6 Months Performance This Year Last Year vs. vs. NZD 000's Dec 2020 Dec 2019 Last Year Last Year % Sales 18,092 22,726 (4,634) (20.4%) Net Contribution 5,769 6,071 (302) (5.0%) Net Contribution % 31.9% 26.7% 519 bps Net Contribution is a non-G
Slide 39: EMEA Performance
EMEA Performance UK, Europe, Middle East and Africa Focus Self funding profitable growth Current Business model; Narrow distribution model
Slide 40: Europe, Middle East & Africa (EMEA)
EUROPE, MIDDLE EAST & AFRICA (EMEA) On a constant currency basis EMEA 6 Months Performance This Year Last Year vs. vs. GBP 000's Dec 2020 Dec 2019 Last Year Last Year % Sales 1,752 1,754 (2) (0.1%) Net Contribution 67 (480) 547 Net Contribution % 3.9% (27.3%) 3,120 bps • Revenue flat vs. PCP due to
Slide 41: Europe, Middle East & Africa (EMEA)
EUROPE, MIDDLE EAST & AFRICA (EMEA) On a reported currency basis EMEA 6 Months Performance This Year Last Year vs. vs. NZD 000's Dec 2020 Dec 2019 Last Year Last Year % Sales 3,394 3,444 (50) (1.5%) Net Contribution 139 (926) 1,065 Net Contribution % 4.1% (26.9%) 3,099 bps • Revenue flat vs. PCP due
Slide 42: Three-part plan: Progress Update and Future Focus
Three-part plan Stabilise, Transform, Build Long Term Resilience Progress Update And Future Focus
Slide 43: Stages of Comvita Development
E STAGES OF COMVITA DEVELOPMENT PP X RR JAN 2020 JAN 2021 - JUNE 24 JUNE 24 C Key Achievements: Key Goals: Key Goals: I OO • Return to profitability • Sustainable profitable growth • Clear route to carbon neutral UU • Reset capital structure (all market segments profitable and positive T and growing
Slide 44: Our Three Point Plan Progress and Update
OUR THREE POINT PLAN Progress and Update Stabilise the organisation Winning in Australia and New Zealand Focus on fundamentals Relentless simplification Positive cashflow paying down debt Inventory management Underperforming assets Transformed organisation Consumer focus Flat organis
Slide 45: Stabilise Performance
S TA B I L I S E P E R F O R M A N C E • Grow domestic consumption and relevance in ANZ • Build brand awareness and loyalty • Share our unique story • Launch unique experiential store • Build authority and leadership with industry, educational establishments, and like-minded organisations • All exis
Slide 46: Transformed Performance
TRANSFORMED PERFORMANCE • Intimate relationship with consumers • Household penetration • Frequency of use • Brand fanatics • Share our unique Comvita story • Experiential brand • Build authority and leadership with industry, educational establishments and like-minded organisations • Additional $10M
Slide 47: Build Long Term Resilience and Growth
B U I L D LO N G T E R M R E S I L I E N C E A N D G R OW T H • Mid-single-digit 5-year revenue CAGR • TAM growth and market share growth in key markets • Zero long-term debt and 20% EBITDA busines model • Double-digit EPS growth (5-year CAGR) • Comvita recognised as a Superbrand • New categories la
Slide 48: 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 20% 12% 15% 12% TAM 15% TAM 20% TAM = NZD$216M = NZD$270M = NZD$360M 48
Slide 49: Why Comvita?
BUILD LONG TERM RESILIENCE AND GROWTH Why Comvita? 49
Slide 50: Full Year Guidance Maintained
F U L L Y E A R G U I DA N C E M A I N TA I N E D • Full year EBITDA guidance at a range of $20.0M to $23.0M • In line with our previous disclosure, and subject to delivering full year guidance, the Board reconfirms its commitment to resume dividend payments at the end of this financial year. 50
Slide 51: Summary
S U M M A RY • Focus strategy starting to deliver results – Strong H1 result • Double-digit growth in focus markets • Good performance in focus categories • Simplified business • Product range • Operating businesses • Roles and responsibilities • Additional $10M dollar transformation programme launc
Slide 52: Questions and Answers
QUESTIONS AND ANSWERS
Slide 53: Thank You
THANK YOU