Challenges abound
THE results of Blackmores – Australia’s first and only, if also only briefly, $ 200 stock since Poseidon hit $ 280, way back in 1970 at the peak of the crazy, well, Poseidon nickel boom – were interesting on three levels.
First, what they said about the current performance and suggested about the future prospects of a key company in Australia’s China future, and which is outside the minerals and energy resources sector.
Secondly, what they said about the state of the company that its departing CEO left behind; and so also what guidance that might provide to the likely performance of that CEO – Christine Holgate – in her new and arguably far more challenging role as CEO of Australia Post.
All three were broadly answered in the share market reaction to the results. The $ 200 days are well and truly behind it; but the results pushed the stock yesterday back towards $ 100, with the closing price marked up 7.5 per cent to $ 97.99.
These days, when even meeting heightened expectations can nevertheless get you a market- whacking, that was an impressive statement.
In short, it suggested that current performance was pretty good; and more importantly, that Blackmores still had a growth future centred on but not totally reliant on China. From admittedly much smaller bases, the vitamin and health foods group was building solid growth stories across China- linked Asia.
It also laid to rest any suggestion that skeletons would come clinking out of cupboards in the wake of Holgate’s departure.
Yes, there are some digestion issues; and, yes, both the macro and the specific China relationships are changing – the next Blackmores CEO won’t be able to just pick up where Holgate left off.
But both the sales dynamics and the balance sheet and performance metrics provide as good a platform as any incoming CEO could ask for.
So on past CEO performance Holgate has pretty much validated her selection.
Obviously AusPost is a completely different company to Blackmores. The latter was all- focused growth; and more recently it had hit two linked speed bumps – maintaining the momentum as Chinese regulatory changes crunched key product sectors.
Yesterday’s numbers suggested Blackmores had not simply ‘ survived’ the impact but indeed nimbly adjusted to sustain a still strong if different growth future.
Group sales went essentially sideways over the year but were up 6 per cent year- on- year in the final quarter.
The hit was taken on domestic sales ( including indirect sales to China: tourists and Aussie based- resellers) which were down 23 per cent. Direct China sales actually zoomed an amazing 71 per cent.
Blackmores notched up double- digit sales growth in Chinese- rich Malaysia, Hong Kong, Singapore and Taiwan and near- double digit growth in Thailand.
Heavy competition, especially in Australia, slashed margins, so both gross and net profit were down 40 per cent or so. Net debt more than doubled to $ 45 million – largely reflecting the one amber light, which was higher inventory.
But that was still a modest debt level; and the inventory looks more like a logistics issue than a fundamental product imbalance.
In sum and in short, nothing to put a question mark over Holgate: as she moves into a job which will arguably attract as much scrutiny ( thanks, fairly or not, to controversies around her predecessor) from a very wide range of potential critics, as that of the CEOs at any of the big four banks and at one in particular.
Just as she leaves a solid foundation at Blackmores, she inherits a similarly solid one at AusPost.
The two big things Ahmed Fahour has left her are the $ 1 postage stamp ( as a symbol of the very necessary and sensible but extremely charged changes around the basic postal service) and the leveraging of AusPost’s network into the parcel delivery space.
On that latter point her ‘ new China’ is Amazon. Her new ‘ rest of Asia’ is the online response of all those retailers challenged by Amazon.
But she also won’t be able to just ‘ pick up’ where her predecessor left off. The basic postal service has to be managed and effectively ‘ declined’; the parcels business offers a growth future but it has to be developed in the context of intense 24/ 7 competition.
At least she can be both well satisfied with what she left behind after nearly a decade building Blackmores and pretty assured that its share price won’t finish at the same destination as Poseidon’s back in the 1970s: zero.