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Blackmores (ASX:BKL) share price rejuvenated as HY21 results beat expectations

The Blackmores Limited (ASX: BKL) share price is shooting higher today after the health supplements company handed in its half-year FY21 report.

In late morning trade, the Blackmores share price had jumped nearly 6% to $78.49. Here are the key points from the results.

Strong international growth offsets weakness in domestic markets

Despite COVID-related headwinds, Blackmores achieved growth across various facets of its business.

Starting at the top line, revenue came in at $302.6 million, up 4% over the prior corresponding period (pcp) of HY20.

China was the strongest performer with revenue jumping 27%, marking the first period of growth in the region in three years. This comes following a step up of investments in talent and marketing, along with a strong performance in the Double 11 e-commerce festival (also known as Singles’ Day).

Blackmores’ international segment also performed well, reporting 19% revenue growth (or 13% on a constant-currency basis). Indonesia was the company’s fastest growing market, achieving 73% growth, while Thailand and Malaysia grew revenue by 13% and 10%, respectively.

It was a different story in the local Australia and New Zealand (ANZ) region, which saw revenue fall by 10% to $148 million. Blackmores has been suffering the same fate as infant formula businesses a2 Milk Company Ltd (ASX: A2M) and Bubs Australia Ltd (ASX: BUB), where fewer international travellers and students has led to a drop-off in sales.

Blackmores noted it turned to increased discounting to try to counter these effects, which will be something to keep an eye on moving forward. The company said it is balancing discounting and price promotions with channel-specific brand campaigns to drive stronger domestic consumption.

In terms of earnings, Blackmores reported underlying EBIT of $30.8 million, a 15% increase over the pcp. This was underpinned by cost control, the benefits of organisational transformation and the delivery of targeted supply chain efficiencies.

On the bottom line, statutory net profit after tax (NPAT) grew by 4% to $18.9 million.

Blackmores finished the half with $71.0 million cash on its books and no debt after repaying its debt facilities in December 2020.

Dividend stages a comeback

In welcome news for income-starved shareholders, Blackmores announced a return to dividends.

After not paying a dividend at all in 2020, the company declared an interim dividend of 29 cents per share, fully franked.

The company’s dividend reinvestment plan (DRP) remains active and shareholders who choose to participate in the DRP will receive a 2.5% discount.

Looking ahead

In regard to outlook, Blackmores expects revenue growth in Asia to continue, with positive signs of health and economic recovery underway. 

However, the Australian vitamin and supplement market will continue to face structural challenges as international borders remain closed.

Overall, the company expects revenue for the second half to be slightly lower than the first half, and it will maintain its focus on cost management.

Interestingly, Blackmores has decided to repay $2.4 million in JobKeeper as this was “deemed to be above the costs and impacts of COVID-19 during the JobKeeper period”. As this decision came after 31 December 2020, this will be reflected in the company’s second-half results.

It’s been a rocky road for Blackmores shareholders in recent years but the growth in China is a big positive from today’s update. For now, I’m happy to watch on from the sidelines as management executes against its three-year growth strategy and tries to rejuvenate the business back to previous heights.

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Disclosure: At the time of publishing, the author of this article owns shares in a2 Milk and Bubs.

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