The Bubs Australia Ltd (ASX: BUB) share price has jumped in response to the FY22 half-year report.
Bubs is one of the fastest-growing infant formula companies in Australia.
Strong growth in Bubs HY22 result
Bubs reported a number of very promising statistics in its half-year report.
- Gross revenue of $38.5 million, up 73%
- Group revenue of $33.6 million, up 84%
- Positive underlying EBITDA of $1.2 million
- Bubs goat infant formula product margin improved from 34% in FY21 to 38%
- All branded products margin increased from 21% in FY21 to 30%
- Bubs infant formula gross revenue doubled
- Corporate daigou gross revenue surged 276%. It’s now ahead of pre-COVID levels
- EBIT loss of $0.2 million
Other highlights
There were a number of other positive revenue indicators over the period.
It was the fastest-growing infant formula manufacturer in Australian retail, with a 31% uplift in scan sales. This refers to Woolworths Group Ltd (ASX: WOW), Coles Group Ltd (ASX: COL) and Chemist Warehouse. Its total market share is now at an all-time high of 3.9%.
Business to business (B2B) Deloraine Dairy Solutions revenue increased 834% year on year and 49% half-on-half. This represented 14% of first-half revenue.
International revenue rose 164% year-on-year and 42% half-on-half, contributing 21% of the six months’ revenue. This segment could be the biggest support for the Bubs share price this decade, as the total addressable market is so large, but it’s not reliant on China.
Chinese cross-border e-commerce (CBEC) gross revenue jumped 53%.
Bubs said that it has partnered with AZ Global to navigate the complexities of the daigou ecosystem.
The USA in-store penetration is underway with secured ranging in Ralphs, Southern California’s largest food retailer and it’s listed with the three largest national food distributors: DPI, KeHE and UNFI. During the reporting period, it went live on the USA’s two largest e-commerce retailer platforms – Walmart.com and Amazon. It was also launched on Thrive Market, an e-commerce retailer with 1 million members that specialises in natural and organic food.
Bubs has also launched 16 new products across three product segments in eight markets.
The company had two consecutive quarters of positive operating cash flow. It finished with $30.6 million of cash.
The company is expecting the reopening of international borders and the return of Chinese students to be a positive.
Outlook and my thoughts on the Bubs share price
Bubs is seemingly back on the right path. It has been through a lot over the last two years. Positive cash flow and positive underlying EBITDA are good. Growing margins, fast revenue growth and an expanding geographical footprint is an attractive combination.
It’s expecting further half-on-half growth in the second half, which is a good sign. Positive EBIT in FY23 seems very possible.
The business has plenty of risks, but it could do very well over the coming years if it continues on the path that it reported today. It’s one of the small ASX growth shares I’m keeping my eyes on.
