Transcription of Finance News Network interview with Blackmores (ASX:BKL) CEO Christine Holgate Lelde Smits: Hello I’m Lelde Smits for the Finance News Network and joining me from natural health company Blackmores
(ASX:BKL) is its CEO Christine Holgate. Christine, welcome back to FNN.
Christine Holgate: Thank you.
Lelde Smits: Blackmores has just released its first half results. What were your highlights?
Christine Holgate: I think the real highlight for me was – It’s not just that we had a great sales and a fantastic profit result. It was that every major region inside our business, sort of every team, really delivered a strong performance. And, I think when you’re running a company and you can see that right across your business, the camaraderie with your people, it’s awesome and that is what I’m most proud of.
Lelde Smits: Blackmores decided to boost its dividend payout by 55 per cent over the first half. Why did you decide to offer such a high dividend?
Christine Holgate: I think firstly it was a great way to reward our shareholders for being with us on the transformation journey and having that same passion and belief that we do. But secondly, I think it does reflect the confidence that the board has in the organisation and where we believe this business will be.
It is also the reason why we stopped the drip. Our balance sheet is really strong, we’ve reduced our debt significantly, in fact more than halved it in this period of time, or net debt. So, that really strong balance sheet plus those really strong results has given us the confidence to be able to come back and I think it’s really special for shareholders to give them the dividend.
Lelde Smits: The company delivered a record interim profit. What were the key areas of growth?
Christine Holgate: There were a number of areas what really contributed to that. Clearly, when you’ve got sales growing so strong inside of your business, it’s not just the sales part that really adds to that but the volumes that come through enable you to drive really big efficiencies. But we have been transforming our business, and particularly in the last 18 months, and some of those initiatives that we’ve put in place you can really start coming to base.
Lelde Smits: Certainly. Turning to Asia now, how did Blackmores' operations perform in the region over the period?
Christine Holgate: Look, I’m really pleased with our Asian result. On a top line we grew sales by 5 per cent across the region. And, that was taking into account some challenges in Thailand which for a long time has been out biggest business. So to have all our other Asian markets coming through and delivering record performances – I mean Malaysia was up nearly 11 per cent, Hong Kong was up over 20 per cent and some of those smaller markets really delivering records. It was a pretty fantastic result.
Lelde Smits: Overall Blackmores’ improved financial position and balance sheet over the period. How was this achieved?
Christine Holgate: That is one of the things I am really pleased about. And again, it goes back to, you know, it’s a combination of higher sales, really tight inventory management, working with our suppliers and that has really driven fantastic improvements in our working capital and cashflows. And in fact, our cash conversion and working capital improved by about 118 per cent, which is pretty significant. That enabled us to really reduce our net debt from $82 million, all the way down to $37 [million].
Lelde Smits: In relation to debt, you took on additional debt to purchase BioCeuticals 2.5 years ago. How has the business impacted Blackmores' results?
Christine Holgate: BioCeuticals has gone incredibly well for us. Sales are up almost 20 per cent but the earnings are up about 40 per cent, and that’s off the back of a really strong year. And I guess what I am really proud about is that the debt that we took on, and our shareholders, it was a new thing, acquiring a business and taking that amount of debt on. We’ve now paid that debt off, it added profits from day one.
Lelde Smits: And Christine what challenges has Blackmores faced over the period and looking ahead what challenges will it be tackling?
Christine Holgate: The challenges that we’ve had and continue to have is that our sales are so strong. That means we’ve really had to keep up with this really strong pace of demand. And that’s not just me, that’s our suppliers. I mean, I’m forever grateful for how they partnered with us. And, that’s actually critically important for me. Because, at the end of this there are consumers who take our product and have real health needs. And, I think it’s really important that we honour their need and have those products available. But, that has been a huge challenge and it continues to be one.
Lelde Smits: Finally Christine could you outline Blackmores strategy for the remainder of the 2015 financial year?
Christine Holgate: I think it’s really important for the next six months that we continue to focus on our strategic priorities. Those of what have been delivering, those of what we have committed to shareholders, and that’s what we are going to do. Whether that is growing in Asia, more operational efficiencies, better understanding of our consumers or really driving product leadership;they’ve worked well and that’s what we need to focus on over the next six months.
The first six months have given us a really strong foundation in case there is something that we don’t know about yet. And, you know, I don’t know what I don’t know, so I still think it is too early to predict. But, what I would say is that I am confident that we will deliver a good return to shareholders at the end of the year.
Lelde Smits: Christine Holgate, thank you for the update from Blackmores.
Christine Holgate: Thank you.
Ends
