Blackmores : 2022 Half Year Report

For personal use only

24 February 2022

ASX Market Announcements Office

Australian Securities Exchange

Exchange Centre

20 Bridge Street,

Sydney NSW 2000

FINANCIAL REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 2021

Attached for release is the Blackmores Limited Financial Report for the half-year ended 31 December 2021.

Further information on Blackmores can be found at www.blackmores.com.au. This announcement was authorised for release by the Board of Directors.

Richard Conway

Group General Counsel & Company Secretary

Blackmores Limited

onlyuse Financial

personalReport

FOR THE

HALF-YEAR ENDED

31 DECEMBER 2021

For

use only
Contents
personal	and Other Comprehensive Income
PAGE
1	Directors' Report
4	Auditor's Independence Declaration
5	Independent Auditor's Review Report
7	Directors' Declaration
8	Condensed Consolidated Statement of Profit or Loss

1. Condensed Consolidated Statement of Financial Position
   For10 Condensed Consolidated Statement of Changes in Equity

1. Condensed Consolidated Statement of Cash Flows
2. Notes to the Condensed Consolidated Financial Statements

Directors' Report

FOR THE HALF-YEAR ENDED 31 DECEMBER 2021

onlyThe Directors of Blackmores Limited submit herewith the Financial Report f Blackmores Limited and its subsidiaries (the Group) for the half-year

ended 31 December 2021. In order to comply with the provisions of the C rporations Act 2001, the Directors' Report is as follows:

The names of the Directors of the Company during and since the end of the half-year were:

useChair:

Anne Templeman-Jones

Directors:

David Ansell

Wendy Stops

Sharon Warburton

Erica Mann (Director since 20 September 2021)

Stephen Roche (Director since 20 September 2021) personalA astair Symington

REVIEW OF OPERATIONS AND

FINANCIAL RESULTS

The Directors report that revenue for the six months to

31 December 2021 was $346.0m, up 14% on the prior corresponding period (pcp), delivering a profit after tax

att ibutable to Blackmores shareholders of $20.3m in the first half of 2022 (1H22).

We were pleased with the performance of our segments, particularly the International segment which saw revenue growth of 50% vs pcp (54% in constant currency). Our fastest growing market of Indonesia saw revenue increasing by 110% (in local currency) driven by increased demand for the Blackmores brand, distribution expansion, and a surge in demand for immunity products. Demand was particularly strong in quarter one (Q1) of the year, which coincided with a spike in COVID-19 cases

Forin the market. Thailand also saw substantial growth at 51% (in l cal currency) as Blackmores gained market share with the immunity segment of our portfolio performing most strongly. Singapore, Hong Kong and Korea returned to growth in the year, following challenges in the first half of 2021 (1H21) due to COVID-19 and travel restrictions, and in Vietnam, Blackmores Infant Formula business continued to grow in the strong double digits compared to the prior year. Underlying Earnings before interest and tax (EBIT) for International increased 61% during the half, increasing at a rate faster than revenue growth owing to cost of goods efficiencies, contained A&P, and moderate operating expense growth. International gross margin improved more than 2 points driven by supply chain savings, stronger product mix and very robust pricing growth.

Revenue in our China segment was up 8.5% (8.5% in constant currency) compared to pcp. Cross border e-commerce channel growth increased 18% against pcp, partly offset by a 7% reduction in revenue from the corporate daigou channel. The Double 11 e-commerce shopping festival continued to be a key contributor to the 1H22 results with Gross Merchandise Value (GMV) sales from e-commerce platforms up 14%. This was a solid result in the context of deceleration and lower levels of consumption growth on ecommerce platforms. China underlying EBIT grew above revenue up 13% compared to pcp while still enabling higher levels of investment in our teams, capability and marketing spend. In total, the combined reported revenue of our China and International Segments was 58% of Group revenue.

Revenue in the ANZ segment of $145.9m was down 1% on pcp, with market conditions continuing to remain challenging in Australia and New Zealand due to COVID-19 impacts such as lockdowns in Q1, ongoing supply chain disruption and out of stocks (OOS). Despite these challenging market conditions, Blackmores, BioCeuticals and PAW brand health measures all remain strong, and we retain our number one market position in Australia in our key segments1, 2. When minor sales of contract manufactured product from Braeside are excluded, sales to retail customers and consumers were flat compared to the prior year confirming that the ANZ business has stabilised and is now trading in line with the category. Pleasingly ANZ saw costs of sales and operating expense decline compared to pcp due to benefits of the OPEX efficiency programs, resulting in underlying EBIT growth of 14%. Deferral of A&P spend to the second half of the year was prudent as effectiveness during COVID-19 lockdowns is limited. Gross margin increased over 2

R E B M E C E D 1 3 D E D N E R A E Y - F L A H E H T R O F T R O P E R L A I C N A N I F S E R O M K C A L B

1. Leading VDS practitioner brand in pharmacy across Australia; BioCeuticals has 77.5% share of the practitioner channel in Australia (12-month average to 22/01/2022). Source: Nielsen IQVIA Scan data to 22/01/2022.
2. Leading VDS brand in Australia: Blackmores has 13% share of total VDS sales in Australia (12-month average to 22/01/2022). Source: Nielsen/IQVIA Scan data to 22/01/2022.

1 2 0 2

1

Directors' Report

FOR THE HALF-YEAR ENDED 31 DECEMBER 2021

onlyp ints in the half-year compared to pcp, with COGS efficiency savings and mix improvement being the biggest drivers of this growth. Our strategy to price Blackmores at a premium position to the market was deemed a success in driving higher earnings

user lative to some of our competitors who use short term deep price discounting to buy market share. While Blackmores was still down slightly in the first half of the year, BioCeuticals saw solid growth and share gains compared to pcp meaning that our total hare of all channels was up in 1H22.

O r Business Improvement Program is on track to deliver annualised gross savings of $40-$42m by end of FY22 and remains on track to achieve our target of $55m annualised gross savings by the end of FY23.

We progressed investment in our demand and supply planning personalcapabilities, including cloud-based SaaS (Software-as-a-Service)

investments in enhanced planning systems. The acquisition of Braeside continued to be a key competitive advantage for the Group enabling stronger focus on growth and product i ovation along with greater control over production and quality. We implemented a price increase of 3% on average across China in October and an even larger increase in International markets, with ANZ seeing a more modest 0.5% price accretion in its competitive market context. At least two-thirds of these price increases are expected to be retained over time after adjustments in our promotional programs. These factors together with the supply savings program contributed to the Group's gro s margin percentage improving by 2.3 points to 54.2%.

Though supply chain challenges as a result of COVID-19 remain elevated, Blackmores has worked to increase inventory levels and seen some improvements in OOS. However, freight and oth r supply challenges globally mean we will need to remain v ry active in inventory management in the coming months and more investment in inventory may be required in the second half. Production, bottling and packing has continued at normal output levels, despite staff shortages and a very tight labour market owing to COVID-19.

ForDu ing the first half, Blackmores Institute (BI), the academic, education and research arm of the Group, continued to lead excellence in education ranking #2 in Australia in 2021. The BI team won gold and silver Brandon Hall awards ('Best Extended Pr gram for BeCertified and Best Certification Program for Complementary Medicine Education (CMEd)'), launched online pharmacy education for BioCeuticals and 85,483 online education modules were completed by pharmacy staff in Australasia. With a focus on the significant health epidemic, the research arm of the Institute continued execution of clinical trials, as much as COVID-19 circumstances allowed in each country.

FINANCIAL POSITION OF THE GROUP

Net assets at 31 December 2021 increased by 5% from

30 June 21 to $399.3m. Total assets increased by 3% or $19.0m to $579.4m in the half, while total current assets of the Group increased by $25.5m to $347.1m. Cash and cash equivalents were $89.4m at 31 December 2021, a $19.3m increase on 30 June 2021. Receivables of $115.4m were $6.9m higher than June 2021 largely due to higher revenue in the final months of the half period. Inventory of $121.8m was $6.1m higher than June 2021 due to a continued focus on improved inventory management and reducing the number of OOS products. Non-current assets declined by $6.5m as amortisation and depreciation exceeded additions. Current and non-current liabilities of the Group decreased by 1% to $180.1m compared to 30 June 2021. Following the successful completion of the capital raise all debt was repaid in 1H21 and remains undrawn at 31 December 2021. All pre-existing debt facilities remained in place as at 31 December 2021.

Cash generated from operations of the Group was $49.1m, a decrease of 16% ($9.7m) compared with 1H21 as the Group began investment in working capital to support faster growth. The new accounting policy change relating to cloud computing also resulted in $5.1m of Information Technology spend, which would have historically been capital expenditure, being reclassified as operating expense (compared to less than $0.5m in 1H21).

EVENTS AFTER THE REPORTING PERIOD

Interim Dividend

On 24 February 2022 the Directors declared an interim dividend of 63 cents per share fully franked. The record date is 23 March 2022, and the dividend is payable on 12 April 2022. The Board and management continue to evaluate a range of investment opportunities designed to support the Group's strategic priorities. The dividend payout ratio of 60% takes into consideration alternative uses of capital considering Blackmores capital management framework. Blackmores has retained the Dividend Re-Investment Plan (DRP) continuing with a 2.5% discount.

Other than the matters noted above, no other matter or circumstance has arisen since 31 December 2021 that has significantly affected or may significantly affect the Group's operations, or the Group's state of affairs in future years.

1 2 0 2 R E B M E C E D 1 3 D E D N E R A E Y - F L A H E H T R O F T R O P E R L A I C N A N I F S E R O M K C A L B

2