There are lots of disappointments here, however the fact that they can't grow in China despite the vitamin market growing strongly says a lot about the brand, products and/or strategy. I understand they have new executives in place to address, but this is still terrible.
Goldman Sachs Report Extract Feb 3rd 2020: "Based on our Tmall/Taobao tracker, BKL has lagged the broader Vitamin and Health Supplements category, with BKL growing at +3% YoY over the last 6 months vs +22% for the broader category."
One positive it the is growth in the other Asia category, sadly becoming a material part of the business due to the lag in Australia and stagnation in China.
The second thing I find annoying is the Catalent acquisition. Management characterised this as major step towards insulating the business from supply issues and creating competitive advantage via internalising manufacturing margins and more flexible product development, among other things. We now learn that issues relating to it will eat half of the profits of the second half due to increased costs and the turnaround (laughable as they just bought it) will take 2 years to realise the competitive advantage.
There is a new CEO and some board turnover, so at least there has been some accountability and fresh eyes on the business.
Perhaps one could assume half of the cost cutting (60m target with previous CEO saying about half would be dedicated to margins) and a 'normal' NPAT of 50m+ to arrive at a profit in a couple years of 75M+, even then the multiple isn't that cheap (17x). Having said that, the size of the pie in Asia is huge, and the new CEO has a very low base to come at the turnaround. It's a good brand to build on and the foundations are there given we know this brand can be highly sought after given past success.
Finally, I'm glad the dividend was cut as the leverage is looking a lot less comfortable. It's better than effectively borrowing to pay the dividend like they have done the last couple of years.
BKL Price at posting:
$76.45 Sentiment: None Disclosure: Held
