The Bubs Australia Ltd (ASX: BUB) share price won't be going anywhere on Monday after the infant formula company requested a trading halt following the release of its full year results and announcement of another capital raising.
How did Bubs perform in FY 2020?
For the 12 months ended 30 June 2020, Bubs reported a 32% increase in revenue to $62 million. This was driven largely by a 58% lift in infant formula sales to $30 million. They now represent 55% of group revenue.
Supporting this growth was a 32% jump in direct sales to China and a five-fold increase in sales to export markets outside China.
The higher weighting of infant formula sales and supply chain efficiencies helped drive improvements in its gross margin. That lifted to 24% from 21% during FY 2020.
However, this wasn't enough to make its operations profitable. Bubs posted a statutory loss after tax of $8 million. Though, this was an improvement from a loss of $36 million a year earlier.
Management commentary.
Bubs' Founder and Chief Executive Officer, Kristy Carr, was pleased with the company's performance in FY 2020.
She said: "Thanks to the foundations laid by the Company over the last two years, Bubs has enjoyed a year of solid revenue trajectory across all core products and in all key markets. Despite the challenges caused by the COVID-19 pandemic, FY20 gross revenue increased 32 percent year-on-year to $62 million with second half revenue advancing 28 percent over last year's second half gross revenue."
"Infant Formula continued be our key driver and most profitable growth engine generating $30 million in revenue, up 58 percent, driven by strong growth in domestic retailers, Junior Nutrition innovation and expansion into Vietnam. The Bubs brand portfolio of products now accounts for 60 percent of group revenue, versus 49 percent in FY19," Carr added.
Capital raising.
This morning Bubs requested immediate back-to-back trading halts be granted. This means its shares will be out of action until 4 September.
Bubs requested the halt pending an announcement in relation to a proposed capital raising.
No details have been released as of yet. But with Bubs burning through its cash and about to embark on the launch of a vitamins range and looking into buying a stake in a China-based infant formula manufacturing facility, it looks likely to be in need of a decent capital injection.
According to the AFR, Bubs is seeking to raise $38.3 million at a sizeable 12.6% discount of 80 cents.
Outlook.
The chief executive acknowledges that FY 2021 will be impacted by COVID-19.
She said: "The new financial year outlook is likely to be coloured by COVID-19 and its impacts, resulting in new ways of doing business and engaging with consumers. Nevertheless, as a scale business we will continue innovate and look to new markets.
Nevertheless, Carr remains positive on the future.
"We expect Bubs Infant Formula to be the engine room for accelerated profitable growth across all key channels and markets. To that end, we can look to an aspirational revenue goal of $400 million and gross margin floor of 40 percent by 2025," she concluded.
