“Including the first quarter of 2021, we have now delivered nine consecutive profitable trading months,” Banfield said.
“We’ve made a good start but there is still a long way to go.
“We’re absolutely focused on delivery of our full-year 2021 result as we reduce inventory, stock-keeping-unit count and look to further simplify the business and free up cash in the process.”
Comvita reported a $9.7 million net loss for the year ended June following a $27.7m loss the previous year.
But underlying earnings before tax, depreciation and amortisation (Ebitda) in the second half of the latest year of $18.4m accounted for most of the underlying annual Ebitda of $19.1m.
The company had 646 stock keeping units at June 30. Banfield said in August he wanted to reduce this by 200. He didn’t give an update on these numbers at the AGM.
Banfield, who joined the company in January, reiterated he is targeting a 150 basis-point improvement in gross profit for the full year and mid-single digit revenue growth with a 20% Ebitda benefit.
The company says gross margin in the year ended June was the highest in more than six years.
Banfield is also targeting a $4m reduction in fixed costs before transformation expenses of $1.5 million. The company will make a material increase in marketing investment in North America and China of about $6m.
Comvita reduced debt to $15.5m from $89m in the year ended June, helped by its $50m capital raising in May and June. It is aiming to reduce debt to zero.
Banfield assured shareholders “we have changed a lot since January and are now focused on ensuring that this is a new beginning at Comvita” after “painful times.”
“Our transformation plan centres around an unrelenting consumer focus, enhanced digital capability and consumer engagement and, finally, enhanced focus on cash and efficiency,” he said.
The coronavirus crisis has led to exponential growth in e-commerce with the US economy recording 10 years’ worth of forecasted e-commerce growth in three months, Banfield said.
That has challenged Comvita to think 10 times bigger.
“We expect to see more competition due to digital, we see greater need for speed and action, and we see consumers actively searching brands that have an authentic link to their purpose,” he says.
“We need to understand our consumers better and focus on activities that drive household penetration and that encourage existing customers to use our products even more regularly as part of their daily ritual.”
Banfield says the company’s success in China is key to delivering long-term value.
The company bought out its Chinese joint-venture partner in the 2019 financial year.
“The China market is the biggest honey market in the world, valued at $1.8 billion. Imported honey makes up around 12 percent of that total market,” he said.
He says Comvita is the strong market leader in manuka honey in China.
“We have our own subsidiary, we have over 200 people on the ground, we have (a) new leadership team complementing existing capability and have now integrated our China subsidiary into the group,” he said.
Chair Brett Hewlett, who was Comvita’s chief executive between 2005 and 2015, told the meeting the company claimed $104,000 from the New Zealand government’s wage subsidy during the national lockdown.
“This was done at the height of the ongoing economic uncertainty for the business. However, we intend to repay this wage subsidy once we return to reporting a profitable result,” Hewlett said.
– BusinessDesk
