Comvita Limited · NZX:CVT
Comvita — Investor Presentation (August 2018)
31 slides from Comvita's investor presentation, August 2018
Slide 1: Investor Presentation August 2018
INVESTOR PRESENTATION AUGUST 2018 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 audited reports for the year ended 30 June 2018; • May
Slide 3: Overview
OVERVIEW • FY18 results • Markets and Investments • Agricultural risk and mitigation • Strategy and FY19 Outlook 3
Slide 4: FY18 Results
FY 18 RESULTS 4
Slide 5: Year in Review – Strong Rebound
YEAR IN REVIEW – STRONG REBOUND • Return to operating profit TOTAL SALES $ • • Net sales increased 19% from FY17 China JV performing well $186m* * China JV sales elimination of $9.3m is deducted from this • $16.4m of share capital issued OPERATING PROFIT AFTER TAX • Breakthrough in North America sal
Slide 6: Key Financial Results
KEY FINANCIAL RESULTS Financial results for the year ended 30 June 2018 30 June 2017 Audited Audited Gross sales $186m $149m • Sales increased 19% from FY17 China JV elimination of sales $(9.3)m - • After tax operating earnings of $9.3m Net sales $177m $149m (Market guidance of 16th April, $8-11m) T
Slide 7: Markets, Operations and Investments
MARKETS, OPERATIONS AND INVESTMENTS 7
Slide 8: Business Has Returned to Growth
BUSINESS HAS RETURNED TO GROWTH • Grey channel sales have M O V I N G A N N U A L T O TA L S A L E S recovered strongly, year on year (12 Month rolling) by 58% 250 • Strategic goal – East/West 200 balance $ MILLIONS • North American 150 breakthrough sales driven 100 by Costco and Amazon • Same store
Slide 9: Sales for the Year Ended June 2018
SALES FOR THE YEAR ENDED 30 JUNE 2018 CHINA EUROPE (Slide 11) NORTH AMERICA (Slide 10) $8.7m $21.4m* ASIA $26.8m (2017 : $7.4m) (2017 : $28.6m) $36.8m (2017 : $3.8m) +17% $46m ** (2017 : $32.4m) (Slide 11) +14% AUSTRALIA NEW ZEALAND $45.5m $37.1m (2017 : $31.8m) +43% (2017 : $33.1m) +12% Figures are
Slide 10: North America
NO RT H A ME R I C A RESULTS • Market sales growth to $26.8m on comparative period • Strong sell-through from newly established relationship with Costco. Distribution in 100 stores in Canada and 200 of 500 Costco stores in US • Costco US in a high stock position of another brand with impact in first
Slide 11: China Joint Venture
CHINA JOINT VENTURE RESULTS • Sales inside China meeting expectations and profit ahead of internal targets - Sales $46m - Share of earnings $3.3m • Good expansion in e-commerce business • Focus on core • Launch new • Transform Bee products products from honey - growth from 38% to >50% of sales • Tra
Slide 12: Product Segments of Total Revenue
PRODUCT SEGMENTS OF TOTAL REVENUE PERSONAL CARE MEDICAL $5m 2% 4% $7m (2017:$4m) (2017:$11m including royalties) 71% 23% HEALTHCARE FUNCTIONAL FOODS $42m $132m (2017:$43m) (2017: $90m) 12
Slide 13: Inventory
INVENTORY • Invested for growth DEBT INVENTORY • Strong inventory position 140,000 - 30 June 2018, $116m 120,000 - 30 June 2017, $88m 100,000 • Finished goods (FG) 80,000 - Consistent at $26m whilst sales grew by 19% 60,000 40,000 - Service level delivery remains stable at 96% 20,000 • Raw Materials
Slide 14: Balance Sheet
BAL ANCE SHEET Key Balance Sheet Ratios 30 June 30 June • Net debt increased to fund inventory and as at 2018 2017 working capital Audited Audited $’000 $’000 • Issue of $16.4m equity on 3 July 2017 as consideration for 51% of China JV Total assets 318,567 256,692 • Trade receivables up $11m reflect
Slide 15: Cashflow
CASHFLOW • Operating cash outflow of $22.1m (FY 2017: $10.7m) 30 June 30 June 2018 2017 • Inventory build to support earnings forecast $’000 $’000 Movement Cash flow movements Audited Audited $000 • Working capital funding to support China and Operating cash North America growth outflow (22,118) (10
Slide 16: Investment - Apiter
INVESTMENT - APITER Subsequent event – 20% Investment in Apiter • Propolis is the key supporting ingredient to Manuka • Propolis products account for circa $18m of revenue • On 2nd July 2018, Comvita completed the investment of 20% in Apiter (Uruguay Propolis supplier) • Purchase price USD$6.25m • C
Slide 17: Investment - SeaDragon
INVESTMENT - SEADRAGON Subsequent event – Refinancing of SeaDragon • A refinancing package of $6m has been introduced to SeaDragon by cornerstone shareholders Masthead and BioScience Managers • Amendment to the terms of Comvita’s existing option and convertible loan note facility also form part of t
Slide 18: Agricultural Risk and Mitigation
AGRICULTURAL RISK AND MITIGATION 18
Slide 19: Manuka Honey Definition
MANUKA HONEY DEFINITION There is now a legal definition for New Zealand Manuka honey exports • Clear, legally enforceable standards for Monofloral Manuka honey • Independent testing required for export certification • Additional complexity in both manufacturing and procurement has increased costs •
Slide 20: Manuka Honey
MANUKA HONEY EXTERNAL FACTORS NZ HONEY PRODUCTION KG/HIVE • Red dots on the graph are where 45.0 the harvest is more than two 40.0 standard deviations from the mean 35.0 30.0 • 2002 crop impacted by Varroa 25.0 • Most recent crop data from 20.0 2017/18 is not available, but the 15.0 season was only
Slide 21: Brand Co vs Supply Co
BRAND CO vs SUPPLY CO • Supply business caused a 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 $10.7m negative swing at an 20 NPAT level compared with 2018 guidance to market 15 OPERATING NPAT ($m) • Apiary business now geared to 10 be profitable at 24kg/hive Brand 13.5 Total Brand 15.5 To
Slide 22: Strategy & Outlook
STRATEGY & OUTLOOK 22
Slide 23: Comvita Strategy: #1 in Manuka Honey Globally
COMVITA STRATEGY: #1 in Manuka Honey Globally GROW SUPERIOR SUPPLY WIN WHERE IT COUNTS BUILD OUR COMMUNITY • 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 • Increase marketing of genetically superio
Slide 24: Strategy – Grow Our Supply
STRATEGY – GROW OUR SUPPLY • Plantations will provide us with the ability to grow 40 • Focus on the breeding programme has 30 been; • To improve DHA quality in Nectar FREQUENCY 20 across different varieties while extending and managing flowering 10 periods to mitigate weather risk 0 • Provide geogra
Slide 25: Strategy – Win Where It Counts
STRATEGY – WIN WHERE IT COUNTS • Build distribution in natural and specialty Markets in North America • China • Continue to build relationships with key Chinese e-commerce platforms • Build more retail locations in Shanghai and Beijing • Price harmonization across channels and markets, particularly
Slide 26: Building Our Community
BUILDING OUR COMMUNITY #1 in China and Hong Kong and investing for growth in the USA • During FY18 we invested in consumer insights including new consumer segmentation across core and emerging markets. Our dominant brand position in China and Hong Kong remain steady, while we have made great inroads
Slide 27: Strategic Cost Management
STRATEGIC COST MANAGEMENT • Operational excellence initiatives to continue to build productivity across the organistion. • Recent changes to our structure, with the integration of our Innovation capability into the Marketing team. • Remote administration support for the US business, reducing our in-
Slide 28: Leadership Team
LEADERSHIP TEAM Scott Coulter Mark Sadd Julianne Keast Kate Selway Chief Executive Officer Chief Commercial Officer Chief Financial Chief People &Culture Officer - Acting Officer - Acting Ben Shaw Simon Pothecary Colin Baskin Chief Marketing Chief Sales Chief Supply Chain Officer Officer Officer 28
Slide 29: Board of Directors
BOARD OF DIRECTORS Neil Craig Luke Bunt Sarah Kennedy Murray Denyer Non-Executive Chairman Independent Independent Independent Director Director Director Paul Reid Brett Hewlett TBC Independent Independent Independent Director Director Director 29
Slide 30: Outlook – August 2018
OUTLOOK – August 2018 • History shows three poor seasons in a row is unlikely • Apiary business model has been evolved further to lower risk • Further update at the Annual Shareholder Meeting in October 30
Slide 31: Thank You
THANK YOU