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Blackmores full year results

 

TRANSCRIPTION OF FINANCE NEWS NETWORK INTERVIEW WITH BLACKMORES (ASX:BKL) CEO, CHRISTINE HOLGATE

Clive Tompkins: Hello Clive Tompkins reporting for the Finance News Network. Joining me from Blackmores for its full year results is CEO, Christine Holgate. Christine welcome back. 
Net profit was up 17% to $24.3 million on record sales of $214.9 million, what was behind the result?

Christine Holgate: Very strong sales performance in all of our core markets we’re growing ahead of that market. Real drive for innovation in the business - we had eighty-eight new products launched in the year. And, you know, you’ve seen that we’ve just started to expand into new markets like animal health – not yet realising those results, but great pipeline for the future - and really driving operational excellence. And I’m really pleased to say that Warriewood is really paying off dividends for us now and I think you can see that in the underlying EBITDA performance.

Clive Tompkins: EBITDA rose 25% versus sales growth of 7%, how did you manage to grow EBITDA at a rate better than three times the growth in sales?

Christine Holgate: Well we were really pleased about that because this has been a year of significant investment. So while we’ve grown it, we’ve also invested quite heavily in our business and I think it really is a reflection of the volume increases that we’ve had in the business. Maybe not so reflected in our overall sales line because of the appreciation of the Australian dollar diluting our Asian performance, but having grown in Asia by 25% which has been a core part of our story this year, that’s helped us drive volume growth through Warriewood and create better efficiencies, which really underpin that bottom line result.

Clive Tompkins: Earnings per share and dividends were up 15 and 17 percent respectively, how much do you earn per share and what is your dividend payout policy?

Christine Holgate: Earnings per share now $1.47 and we’ve got a dividend for the whole year of $1.12, second half dividend 70 cents. Over the whole year the dividends up 17% and we have a payout rate – well we never really had a strategy as such we’ve held to, but for some time now we’ve paid at around 75%, this is slightly more generous. But I think it’s an important year to thank shareholders for their continued loyalty and support and it’s our eighth year of record profits and sales. So we’re very pleased with it.

Clive Tompkins: Looking at the makeup of sales now, you mentioned Asian sales growth of 25% on a constant currency basis, what percentage of sales does Asia account for?

Christine Holgate: It accounts for about 16% of sales in Australian dollar terms but probably more than 20% in volume terms. Now again, as I said, it’s really to do with the appreciation of the Australian dollar this year diluting that, but I think probably a more important fact is that just over 50% of our profit growth this year came from Asia. I think that really underpins the importance of Asia in our business.

Clive Tompkins: And where do you operate in Asia and what are your plans for the region?

Christine Holgate: Today we operate in five core Asian markets - Thailand, Malaysia, Singapore, Hong Kong and Taiwan. We’ve had phenomenal growth from those; you know 37% for Thailand, 17% for Malaysia which are our core markets. We’re now expanding much deeper into Hong Kong and Singapore taking back those businesses from either distributors or exclusive supply agreements, and in Taiwan. So I personally feel the significant opportunity even in the markets that we’re in, continuing to invest in frontline customer coverage resource and on top of that we’re really driving hard this pipeline of new products.
Now as we do that we will look to see if there are opportunities for us to expand into further Asian markets, leveraging the skill and expertise we already have in those Asian countries.

Clive Tompkins: You’ve partnered with Eu Yan Sang a leading healthcare company in Asia, what does the partnership involve?

Christine Holgate: This first stage of the partnership Blackmores has got the privilege of being the only Western brand to distribute in their stores, and their stores aren’t typical stores. They’re very specialist Chinese traditional medicine where they give also, sort of like naturopathic advice in their store, so we’re very privileged to do that. 
But together we’re trying to learn about the integration of Eastern and Western medicine. I think there’s a very powerful opportunity for both of us and I think as we explore that, we’ll look for opportunities for perhaps Blackmores to learn to see their opportunities in that field for our customers. Early stages but very encouraging first signs.

Clive Tompkins: And when did it commence?

Christine Holgate: Second half of this year we really started to drive distribution from April so you’re starting to see that flow through in Singapore and Malaysia. So again, really very early stages at this point but I think both sides are very happy with the progress.

Clive Tompkins: And Christine can you tell us something about Eu Yan Sang?

Christine Holgate: Eu Yan Sang are about a hundred years old. There’s an enormous amount of similarity between Eu Yan Sang and Blackmores. You know Richard Eu who’s the current chief executive – it was founded by his father, it’s based on the same naturopathic principles as Blackmores was based on. We have an enormous amount I think of common value system inside the organisation, so we make really nice partners. And I think learning about East and West; I think that’s what’s going to be a really important part actually for the development of the Australian health solution, so we’re quite excited about it.

Clive Tompkins: Christine locally sales grew 7% with fourth quarter sales of $53.2 million in line with expectations, what were the highlights?

Christine Holgate: I think delivering was the highlight in all honesty Clive. Much tougher retail environment right here in Australia right now. And the fact that we’ve continued to hold our position, I think is really encouraging and that we didn’t see a decrease from Q4 to Q3 which many of the retail partners have here. So delivering was definitely a highlight. I think we’ve got some good things in place and have invested quite a lot in the fourth quarter to builders and supporters in the year ahead.
Asia, fantastic fourth quarter even on top of this time last year where we had all the benefit of Swine flu - probably shouldn’t say that as a benefit, but you know realistically, I think that helped a lot of health companies. So we are very pleased with the performance.

Clive Tompkins: Last question. Blackmores products enjoy a trusted position in the vitamins and supplements space, what can consumers expect from Blackmores in the year ahead?

Christine Holgate: It’s a - it’s a good question, look I think they can absolutely be guaranteed that we will continue to invest in innovation in our products. Quality is absolutely important to us and we will look for ways we can continue to improve that. I think probably that most importantly, they can always be rest assured that Blackmores will do what they say they’re going to do and I think that’s quite important too.
So, we’ve won again the Readers Digest Most Trusted Brand here in Australia and in Thailand. And we’ve just won a major brand in Malaysia – brand award in Malaysia and in New Zealand as well. So I think that’s a reflection of confidence our consumers have in us. Something we never rest on our laurels on – we’re deeply appreciative of and we will continue to invest to make sure that we honour those commitments.

Clive Tompkins: Christine Holgate thanks very much for the update.

Christine Holgate: Thank you.