CVT
28/11/2013 08:32
HALFYR
REL: 0832 HRS Comvita Limited
HALFYR: CVT: Comvita Half Year Result and Dividend
Comvita's net profit after tax (NPAT) for the six months to 30 September 2013
is a loss of $0.8m on sales of $43.4. This compares to an NPAT in the prior
half year period of $2.4m on sales of $45.4m. The result is in line with
guidance given to the market on 11 October 2013.
Comvita Chairman Neil Craig said, "For the year ended 31 March 2014, we
remain confident of exceeding the $103.5m revenue and $7.4m NPAT we achieved
in the 2013 financial year. Against this background, we are maintaining our
4 cents per share fully imputed interim dividend in respect of the first half
year. This will be paid on 20th December 2013 for those registered on 13th
December 2013. The dividend reinvestment plan will not apply."
Second half sales and earnings stronger than first half
Comvita CEO Brett Hewlett said, "At the time of giving our guidance on 11
October 2013, we provided a detailed explanation of why revenue and earnings
are increasingly biased toward the second half of our financial year."
"Comvita has historically had a year of two profit halves with the second
half year sales and earnings stronger than the first half due to many of our
product lines primarily being consumed in the northern hemisphere winter
months. This effect is compounded by Asian tourists purchasing our products
in New Zealand and Australia during the peak tourism season in our own
summer. As we grow our retail infrastructure in Asia and with the Australian
market continuing to be quite soft, the effect of this year of two halves is
becoming more pronounced."
"While sales are down for the first six months on the prior comparable period
by a little over $2m, shareholders should not read too much into this", says
Mr. Hewlett. "For this financial year ended 31 March 2014, we expect in
excess of 60% of our total sales (56% in 2013) to be in the second half of
the year. Furthermore, we necessarily carry an overhead and marketing cost
structure in place for the full year, which negatively impacts our first half
earnings."
Mr. Hewlett said, "Trading conditions in most markets have been challenging
throughout the six month period but in particular in the wholesale markets of
Australia and the United Kingdom (where we have limited sales direct to the
consumer), price competition was strong."
"Sales in Hong Kong, our second largest market after Australia, have begun to
recover from the recent food security issues which heightened consumers'
scrutiny of all imported food products from New Zealand. We were hit
particularly hard in the last two months of the six month period with respect
to Hong Kong sales. Over the last two months, we ran a marketing campaign
based around food safety which has reassured our customers of the quality and
integrity of the Comvita brand as we enter the Asian high season of December
through to March. We remain confident that sales in this key Asian market
and other North Asian markets will be up to our budgeted figures over the
second six month period."
Bolstering raw material supply and security
"While it is imperative to grow our revenue and profitability for the full
year, we also have a strong focus on the key strategic initiative of
increased control over our raw material supply and costs."
"The announcement last month of the purchase of Tawari Apiaries in Gisborne
provides a strong fifth hub for honey production in the North Island as well
as providing a platform to build strategic, long term relationships with
landowners in the East Coast region. Other Comvita wholly-owned apiary
businesses are located at Kerikeri, Waikato, Whanganui and Wairarapa."
"We are on target this year to have in excess of one third of our honey
supplies from our 100% owned apiaries. Our strategic objective is to own 50%
of our own supply of honey. The balance of our supply will come from long
term contractual arrangements and partnership arrangements, which we value
highly. Honey supply partnerships with Comvita involve a long term supply
contract as well as access to significant knowledge of Manuka plant
propagation. This is in addition to volume and value enhancing apiary
production methodologies which we have built up over nearly 40 years."
"Raw Manuka honey costs remain high and have impacted our gross margins over
the last 12-18 months. There is mounting market resistance to continually
rising prices which impacts sales generally. However, we expect this
'farm-gate' price pressure to ease in the coming year. Supply and demand
will naturally come into balance with the strong honey harvest of the last
and current, season. Anecdotally, honey production from the northern half of
New Zealand this current season appears to be significantly larger than last
year's above average volume harvest. After two very poor harvests in 2010/11
and 2011/12, this will enable Comvita to build an inventory of honey as a
risk mitigation measure. Comvita's own 'in-house' production will also help
our average cost of supply."
Further investments for growth
o The investment of $8.9m in Comvita shares by Derma Sciences, our specialist
woundcare partner, will be used to support the company's apiary acquisition
and harvest modernisation strategy, to ensure sufficient supply of
medical-grade Manuka honey to meet the strongly growing demand for the
Medihoney(TM) wound care product line.
o In support of ensuring full control over quality and safety of any product
we produce from Comvita, as announced on 25 September 2013, we invested a
further $1m in world leading laboratory equipment. This will provide us with
a competitive edge when it comes to consumer confidence and trust in our
brand.
o The opening of our new Comvita Tourism Centre, 'Experience Comvita' will be
the focus of branding and sales for the very large numbers of mainly offshore
visitors from cruise ships and organised tours. This joint venture with the
Department of Discovery is new territory for Comvita with the objective not
so much in the profit that will result from this operation, but brand
recognition that will result in sales when visitors return to their home
country.
o Comvita has increased the planting programme of olive trees produced from
our in-house nursery operation. More than 250,000 new trees are being planted
at our new organic farm just west of Brisbane, Australia. These new trees
will be ready for the first harvest of fresh olive leaf in approximately two
years' time.
o The Company is also investing in a number of system projects that are
important in building our global sales infrastructure. These are a
Point-of-Sale till system for retail outlets to better capture sales and
customer data; a Demand Planner system to further optimise production
planning and inventory management; an Apiary Management System to enable
greater control of our expanding apiary business network and a rebuild of our
website to provide a more effective, global E-commerce platform. Total
capital spend of these projects is approximately $6.6m and will be completed
over the next two to three years.
Mr. Craig said, "We remain committed as a Board and Management to deliver
both steady and growing income and dividends, and sustainable revenue
growth."
# Ends #
For further information:
Brett Hewlett, Comvita CEO, 021 740 160.
Neil Craig, Comvita Chairman, 021 731 509
Julie Chadwick, Comvita Communications Manager, 021 510 693
Background information
About Comvita (www.comvita.com)
Comvita is an international natural health and beauty company committed to
the development of innovative products, backed by credible scientific
research. We are the global leader in Manuka (leptospermum) honey and
fresh-picked Olive Leaf Extract, which are at the core of the Comvita product
range. We have approximately one third of honey supply under our ownership
with the balance of supply from long term contractual and partnership
arrangements. Comvita's fresh Olive Leaf Extract is grown, harvested,
extracted and bottled at the world's largest specialised olive leaf grove,
with over 580,000 olive trees. Comvita sells into more than 18 countries
through a network of wholesale and third-party outlets and online. We have
offices in New Zealand, Australia, Hong Kong, Japan, Taiwan, South Korea and
the United Kingdom.
Comvita Limited
Results for announcement to the market
Reporting Period 6 months to 30 September 2013
Previous Reporting Period 6 months to 30 September 2012
This report, including the results for the previous reported half year, is
consistent with the unaudited interim financial statements of Comvita Limited
for the six months ended
30 September 2013.
Consolidated Results
1. Results $NZ 000
Revenue from ordinary activities
Current half year $43,362
Down 4.6%
Previous reported half year $45,434
Profit from ordinary activities after tax attributable to security holder
Current half year ($790)
Down 133.1%
Previous reported half year $2,386
Net profit attributable to security holders
Current half year ($768)
Down 132.4%
Previous reported half year $2,386
2. Net Tangible Assets per Security
As at 30 September 2013 $1.47
As at 30 September 2012 $1.21
3. Interim Dividend
Amount per security - 4 cents
Fully imputed
Record date is 13 December 2013
Dividend payment date is 20 December 2013
End CA:00244404 For:CVT Type:HALFYR Time:2013-11-28 08:32:36
