Comvita Limited · NZX:CVT
Comvita — H1 FY2020 Earnings Presentation
33 slides from Comvita's earnings presentation, Feb 27, 2020
Slide 1: Investor Presentation Half Year Result FY20
I N V E S T O R P R E S E N TAT I O N HALF YEAR RESULT FY20 | 27 FEBRUARY 2020 Presented by: David Banfield, CEO | Brett Hewlett, Chair 1
Slide 2: Important Notice
I M P O R TA N T N O T I C E This presentation is given on behalf of Comvita Limited. Information in this presentation: • Should be read in conjunction with, and is subject to, Comvita Annual Reports, Interim Reports and market releases on NZX; • Is from unaudited interim reports for the six months
Slide 3: Agenda
AGENDA 1. Introductions 2. Interim Results FY20 3. Cashflow, Inventory and Net Debt 4. Honey Harvest Update 5. Market Segment Performance 6. Key Findings & Turnaround Plan 7. Q&A
Slide 4: Introductions
INTRODUCTIONS 4
Slide 5: Coronavirus
CORONAVIRUS We are closely monitoring the evolving situation with the Coronavirus in China and around the world. Our first thought is for our Comvita team and all those that have been affected. We have instigated a dedicated team to monitor best practice and ensure we are doing everything possible t
Slide 6: Interim Results FY20
I N T E R I M R E S U LT S FY20 6
Slide 7: Headlines
HEADLINES • Reported NPAT -$(12.97)m • Non-operating items - $5.8m including $2.3m impairment of Australian joint venture due to bush fires • Underlying EBITDA* +$1.3m +32.5% • Revenue +20.7% primarily due to China market integration • China and North America show opportunities for profitable growth
Slide 8: Half Year in Review
HALF YEAR IN REVIEW • N E T P R O F I T A F T E R TA X $(12.97)m • N O N - O P E R AT I N G E B I T D A I T E M S $(6.7)m vs $0.7m in PCP* • ONE-OFF EBITDA ITEMS $3.4m vs $0.4m in PCP • U N D E R LY I N G E B I T D A * * +$1.3m vs +$1.0m +32.5% vs PCP • GROUP REVENUE $94m + 20.7% vs PCP • CHINA MARK
Slide 9: Underlying Result Reconciliation
UNDERLYING RESULT RECONCILIATION 31 Dec 31 Dec 31 Dec 31 Dec 2019 2019 2018 2018 NPAT EBITDA NPAT EBITDA Note $’000 $’000 $’000 $’000 Per financial statements (12,970) (8,829) (2,678) 1,325 Add back non-operating items: Comvita China - release of inventory fair value A 2,674 3,567 Impairment of e
Slide 10: Cashflow, Inventory & Net Debt
C A S H F L O W, I N V E N T O R Y & NET DEBT 10
Slide 11: Cashflow
CASHFLOW 31 Dec 2019 31 Dec 2018 Cash flow movements unaudited unaudited Movement • Operating cash inflow $887k Operating cash inflow 887 6,337 (5,450) • Operating cashflow consistent with operating Investing activities (3,030) (17,911) 14,881 loss for 6 months to 31 December 2019 less Financing act
Slide 12: Inventory & Net Debt
INVENTORY & NET DEBT 31 Dec 31 Dec 30 June Key Balance Sheet Ratios as at 2019 2018 2019 unaudited unaudited audited $’000 $’000 $'000 • Inventory reduced by $2.9m vs 31 December 2018 Total assets 303,970 326,971 310,043 and $16.0m vs 30 June 2019 Total inventory 116,139 119,040 132,192 • Finished g
Slide 13: Honey Harvest Update
HONEY HARVEST U P D AT E 13
Slide 14: Honey Crop 2020
HONEY CROP 2020 Early national crop indicators are positive • Strong settled summer after a volatile spring • Good flowering and nectar flow reported across the country • Mānuka harvest underway • Early quality results promising Comvita crop forecasted to exceed budget and prior year • Mānuka harves
Slide 15: Market Segment Performance
MARKET SEGMENT PERFORMANCE 15
Slide 16: Sales for the Half Year Ended December 2019
SALES FOR THE HALF YEAR ENDED 31 DECEMBER 2019 CHINA* NORTH AMERICA $40.7m REST OF ASIA $8.4m EMEA*** (2018 : $38.1m) $8.5m (2018 : $8.1m) $3.4m (2018 : $8.9m) (2018 : $3.1m) AUSTRALIA / NZ (ANZ) & CBEC** $31.2m (2018 : $36.7m) Figures are based on unaudited results to 31 December 2019. Other sales
Slide 17: China (Like-for-Like Performance)
CHINA (LIKE-FOR-LIKE PERFORMANCE) 6 months 6 months Variance Variance % NZD ($’000) Dec-2019 Dec-2018 Fav/(Unfav) Sales 29,669 25,842 3,827 15% Net Contribution 3,744 2,886 858 30% Net Contribution % 12.6% 11.2% First full six month period of China integration • Like-for-like revenue in China +15% •
Slide 18: China including Hong Kong
CHINA including HONG KONG 6 months 6 months Variance Variance % NZD ($’000) Dec-2019 Dec-2018 Fav/(Unfav) Sales 40,664 18,908 21,756 115% Net Contribution 4,390 1,685 2,704 160% Net Contribution % 11% 9% 2% • Total revenue plus 115% due to consolidation of China subsidiary • Net contribution +160% d
Slide 19: Impact of Coronavirus on Performance
I M PA C T O F C O R O N AV I R U S O N P E R F O R M A N C E General • Propolis and Mānuka honey (over 90% of revenue) have known anti-viral, anti-microbial and immunity benefits, we are pleased to be part of a solution to help our consumers build general immunity • Where footfall is unaffected by
Slide 20: Rest of Asia
REST OF ASIA 6 months 6 months Variance Variance % NZD ($’000) Dec-2019 Dec-2018 Fav/(Unfav) Sales 8,497 8,880 (383) -4% Net Contribution 1,495 1,305 190 15% Net Contribution % 18% 15% 3% Revenue -4% due to timing of activity in Japan • Strong double digit sales growth in Korea • First flagship stor
Slide 21: ANZ & CBEC
ANZ & CBEC 6 months 6 months Variance Variance % NZD ($’000) Dec-2019 Dec-2018 Fav/(Unfav) Sales 31,182 36,721 (5,539) -15% Net Contribution 8,565 9,937 (1,372) -14% Net Contribution % 27% 27% 0% New Zealand export changes • Changes to MPI small parcel export requirements impacted revenue by -$2.7m
Slide 22: North America
NORTH AMERICA 6 months 6 months Variance Variance % NZD ($’000) Dec-2019 Dec-2018 Fav/(Unfav) Sales 8,414 8,053 361 4.5% Net Contribution 957 1,178 (221) (18.7%) Net Contribution % 11% 15% (3.3%) • Revenue +4.5% with good performance across major customers • Contribution margin impacted by customer
Slide 23: Europe, Middle East and Africa (EMEA)
EUROPE, MIDDLE EAST AND AFRICA (EMEA) 6 months 6 months Variance Variance % NZD ($’000) Dec-2019 Dec-2018 Fav/(Unfav) Sales 3,444 3,127 317 10% Net Contribution (909) (279) (630) 226% Net Contribution % -26% -9% -17% • Revenue +10% vs PCP • Contribution -$630K due to clearance of slow moving and obs
Slide 24: Key Findings and Turnaround Plan
KEY FINDINGS AND TURNAROUND PLAN 24
Slide 25: Key Findings
KEY FINDINGS • Market leader in Mānuka and key bee products categories • Technical leader in Mānuka • Quality leader in honey and propolis • Role as category guardian Arotahi • Highly relevant to current macro economic and megatrends • Highly capable and committed team members
Slide 26: Key Findings
KEY FINDINGS • Loss of focus, complicated business • Organisation disconnected from market needs and slow to react • Unsustainable costs • COGS Arotahi • OPEX • Elevated gearing covered by saleable inventory but key processes inefficient
Slide 27: Arotahi (Focus)
AROTAHI (FOCUS) • Focus on key growth markets – China and North America • Total addressable market US$1.5 bn • Profitable growth ANZ and all other regions • $15m business transformation • Simplified and integrated operations • Capital structure supporting growth
Slide 28: Size of Prize – China
SIZE OF PRIZE – CHINA • Total addressable market US$1.2 bn • Imported honey 12.5% of total • Double digit CAGR forecasted • Mānuka / imported forecast to over index • Key attribute – Trust and heritage Comvita in China • Comvita is the market leader in China • Significant brand equity • Experienced
Slide 29: Size of Prize – North America
SIZE OF PRIZE – NORTH AMERICA • Total addressable market US$340m • Current imported honey market circa 30% - US$102m • High single figure CAGR expected over the next five years • Strong adoption by millennials and rapidly expanding availability through online and mass retail Comvita in North America
Slide 30: Actions – Arotahi (Focus)
ACTIONS – AROTAHI (FOCUS) $15m transformation programme launched Goals • 500 bps improvement in gross margin per annum • $5m reduction in fixed costs per annum • Automation and integration of key internal processes to improve efficiency, scalability and accuracy • Simplification of operating compani
Slide 31: Capital Raise
CAPITAL RAISE • In order to reduce risk and build resilience for the company during strategic reset and business transformation programme, Comvita plans to recapitalise the business • This will include a renounceable rights issue to existing shareholders • Details will be announced in the coming wee
Slide 32: Questions and Answers
QUESTIONS AND ANSWERS 32
Slide 33: Thank You
THANK YOU 33