The Blackmores Limited (ASX: BKL) share price will be on watch on Tuesday after the health supplements company released its full year results.
For the 12 months ended June 30, Blackmores posted sales revenue of $601.1 million, earnings before interest and tax (EBIT) of $101.6 million, and net profit after tax of $70 million. This was an increase of 9%, 18%, and 19%, respectively, on FY 2017’s result.
Earnings per share came in 19% higher year on year at 406.4 cents per share, allowing the board to declare a final dividend of 155 cents per share. This brought its total dividend to 305 cents per share for FY 2018.
The key drivers of revenue growth for Blackmores in FY 2018 were its China, Other Asia, and BioCeuticals segments, which offset a soft performance from its Australia and New Zealand (ANZ) segment. Sales in Blackmores’ ANZ segment fell 1.5% to $266 million as China-influenced sales continue to move to direct export channels. Segment EBIT fell 2% during the period.
The highlight during the year was arguably its China segment which grew sales by 22% to $143 million. This was driven largely by strong demand across all e-commerce platforms and led to segment EBIT increasing 28% year on year despite a significant level of expense for doubtful debts. Management has advised that it is taking all appropriate avenues to recover these debts.
Sales in the Other Asia segment rose 20% to $82 million in FY 2018 thanks to strong performances from Singapore, Hong Kong, and Korea. While there was growth in Thailand and Malaysia, this was held back by supply constraints. Segment EBIT increased by 163% on the prior corresponding period.
Blackmores’ BioCeuticals segment was another strong performer and grew revenue by 13% to $109 million. A 20% lift in BioCeuticals-branded products did the heavy lifting, offsetting a soft performance from its Global Therapeutics business. Segment EBIT grew 14% year on year.
In addition to announcing its results, the company advised that it has made the $9 million strategic acquisition of CSIRO-endorsed, clinically trialled weight management program Impromy from Probiotec Limited (ASX: PBP). CEO Richard Henfrey believes the acquisition supports its strategic priority to drive innovation and leverage expertise in areas of chronic disease. The acquisition is expected to be accretive to earnings in the first year.
The company starts the year with inventory levels of $104 million. This is $19 million higher than this time last year and has been done in order to prevent shortages that impacted the business last year.
Blackmores’ China business is expected to be given a boost from a strategic co-operation with e-commerce giant NetEase Kaola that was signed last week, complementing its existing agreement with Alibaba.
Mr Henfrey hasn’t provided any clear guidance for FY 2019 but has stated that “The Board shares my confidence in our ability to continue to deliver sales and profit growth in the coming year.”
Should you invest?
The market was looking for a net profit after tax of $70.7 million according to the Bloomberg consensus estimate. This slight miss could potentially put its shares under a spot of pressure today.
If it does, I would suggest investors consider snapping shares with a long term view because I continue to believe it has a very bright future ahead of it in China along with sector peer A2 Milk Company Ltd (ASX: A2M).
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Blackmores Limited. The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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