TRANSCRIPTION OF FINANCE NEWS NETWORK INTERVIEW WITH BLACKMORES (
ASX:BKL) CEO, CHRISTINE HOLGATE
Emma Pearson: Hello Emma Pearson reporting for the Finance News Network. Joining me today from Blackmores for its half year results is CEO, Christine Holgate. Christine welcome back to FNN. So how has the first half been?
Christine Holgate: It’s been pretty fantastic thank you. Look we’re really pleased, sales are up 14% for the group, EBITDA’s up nearly 20% and profits up 7% so we’ve had a lot on, it’s been a busy period but I think we are all really pleased for the results.
Emma Pearson: Looking at the numbers profit was up 7% to $12.8 million compared to the same period a year ago, what’s your assessment of the result?
Christine Holgate: This has been a period of significant investment in the business and we’re actually extremely pleased by this result. First up we’ve been investing heavily in getting closer to our customers and I think you can see that reflected in our sales. Australia our sales are up 14% and compared to 3.7% this time last year, in Asia they’re up 11%, in constant currencies they’re up 30% and we’ve invested heavily in new products. We’ve rolled out forty new products in the first half of this year alone and a lot of that has been about driving new products, reinvigorating the products that we do have and driving product registrations through our Asian businesses which was a core focus last time we spoke. Equally important is investing in our people, training and development of those people and increase rewards and I think that’s been reflected with a 96% vote in support of our new Collective Agreement and driving efficiencies in Warriewood. So we’ve had a significant period of investment whether it’s in people, a whole new website and content facility, or for the fact this time these six months reflect the first time we’re paying interest in depreciation on our building, but without that building we wouldn’t have these results. So we’re very pleased.
Emma Pearson: And where have we seen the most improvement?
Christine Holgate: Undoubtedly the turnaround in Australia has driven the most significant improvement in the financial results, the growth rate going from 3.7% to 14% actually, so it’s been pretty phenomenal. And that’s supported by extra points of presence for customers, another 250 in Australia alone, supported by more merchandisers, more training, more sales people, but that has been a phenomenal effort to achieve that.The new products that we’ve driven have been proven to be very successful and the investment in, you know, the people that support and encouragement of people in Blackmores and the commitment is next to none.Our Asian businesses though too have shown an incredible turnaround in performance. Our Thai business which is in local currencies grew by 46% in the first half. That compares to 11% growth rate for the whole of last year and our Malaysian business grew by 12% in the first half, comparing it to 2% that we achieved for the whole of last year. So a lot of improvement in the business, we’re particularly pleased to be starting to see the efficiencies coming through from our investment from Warriewood and I think it’s a collection of all of those aspects that really underpin this result.
Emma Pearson: Talking about the new Warriewood facility, how has the investment been performing?
Christine Holgate: Ah pretty fantastic, we’re extremely pleased and I’ll give you a couple of sort of simple comparisons. For example, you know, today we do on average 82,000 units on our production line. Historically in our old site, we used to do about 50,000 and I think that’s just a real reflection of the turnaround of the increased capacity that we have. We bottle over a million bottles in that production plant every month now and I think again, it just gives you a sign of the scale that we’re driving through that Warriewood operation. So we’re extremely pleased with it and we’re very confident that we can continue to drive and develop those efficiencies going forward.
Emma Pearson: How important has new product development been in delivering growth?
Christine Holgate: It’s been extremely important. Innovation is important from so many different aspects; it actually is a key factor underpinning your brand. I’ll give you an example, in Malaysia last month we launched a new Omega range – it’s actually a range we have very successful here in Australia – we launched it in Malaysia and in that month alone it contributed to 12% of sales for the month. And I think that gives you an indication of how important innovation is, not just to stimulate sales but really underpin the vitality of the brand for retailers.
Emma Pearson: Turning now to Asia, your sales in Asia were up on the back of the H1N1 flu, how else are you developing growth in this region?
Christine Holgate: Undoubtedly in Thailand in the first quarter we did benefit from the H1N1 flu and we‘re very pleased to say, and that did help support that sort of 46% growth in the first half in Thailand. However, that was only one factor, the business is continuing to grow strong in local currencies and I think you’ll find by the end of the year, the drive for new products, the focus on customers and the investment in our people is having actually a much bigger impact than the fad really of H1N1.We’ve introduced new products, we’ve reformulated products that we had in Australia which proved very successful and launched them into the Asian market and we’ve gone through a major rebranding exercise in Asia where we’ve launched a whole new merchandising and packaging for our products in that market place. And that might sound extremely simple but when you have, you know, large volumes of skews like you do in my market, like over a hundred different products for that market, there’s an element of complexity in that, but the team have worked very hard and we’re very pleased with the results.
Emma Pearson: Looking now to New Zealand, how did the company perform in that market?
Christine Holgate: In New Zealand we actually run our business through a partnership with a distributor, so we actually only take a royalty from those sales. In local currencies in the New Zealand dollar our sales grew about, somewhere between 2.5 and 3% - think it was 2.7% if I recall correctly. And we’re actually quietly encouraged by that – the New Zealand market’s actually a much harder than Australia; you know they’re still going through some much tougher economic times, but we’ve got a real focus happening in that business. We’ve launched new incentives in the second half; new products and we’re really working very closely with the API team on the ground, who are our distributor partners.
Emma Pearson: Last question now Christine. What’s your outlook for Blackmores for the next quarter and beyond?
Christine Holgate: We’re very aware that we’ve had a great start to the year but there are some tougher, you know, economic challenges in the market. We’re aware that the Australian dollar remains high and that continues to dilute the impact of our strong Asian sales. Interest rates are creeping up here in Australia and I think even yesterday, you saw consumer confidence beginning to weaken here in Australia and I think taking all that into account, you know, it gives us an element of caution. But building on the back of the pipeline of improved customer contacts, driving new products and investing in our people, we believe that we’ll deliver a healthy return to shareholders at the end of the year and healthy growth. And today we’ve announced an 8% increase in our dividend to 42 cents, so I think that’s a sign of how we’re feeling about the business.
Emma Pearson: Christine thanks for the update.
