Comvita 2017 Annual Shareholder Meeting – presentation

ANNUAL SHAREHOLDERS’
MEETING
18 OCTOBER2017
1

This presentation is given on behalf of Comvita Limited. Information in this presentation:
•shouldbe read in conjunction with, and is subject to, Comvita’s Annual Reports, Interim Reports and market releases on NZX;
•is from audited financial statements for the year ended 30 June 2017;
•may contain projections or forward-looking statements about Comvita. Such forward-looking statements are based on current
expectations and involve risks and uncertainties. Comvita’s actual results or performance may differ materially from these
statements;
•includesstatements relating to past performance, which should not be regarded as a reliable indicator of future
performance;
•is for general information purposes only, and does not constitute investmentadvice;
•is current atthedate of this presentation, unless otherwise stated.
While all reasonable care has been taken in compiling this presentation, Comvita accepts no responsibility for any errors or omissions.
All currency amounts are in NZ dollars unless otherwise stated.
IMPORTANTNOTICE
2
Annual Shareholders’ Meeting 2017
2

1.Welcome / Apologies –Neil Craig
2.Chairman’s Address –Neil Craig
3.CEO’s Address –Scott Coulter
4.Formalities and Resolutions
5.General Business
6.Director Farewell
7.Afternoon Tea
CONTENTS
Annual Shareholders’ Meeting 2017
3

WELCOME TO
NEIL CRAIG
CHAIRMAN’S ADDRESS
4

CHAIRMAN’S SUMMARY
TOUGH YEAR
Annual Shareholders’ Meeting 2017
•Two significant external events
-Changes to China’s regulatory environment
took a long time to work through
-Extremely poor honey season
•We improved our balance sheet
-China Resources placement
-Medihoney® IP and share sale
-Enabled us to maintain our long term strategy
•Reviewed and ratified our strategy
•Strong finish to FY17, and good start to FY18
5
SALES
$155.9m
EARNINGS
$9.8m
OPERATING
EFFICIENCIES
$7.0m
BALANCE SHEET
$51m cash raised

SarahKennedy
Independent
Director
MurrayDenyer
Independent
Director
Paul Reid
Independent
Director
BrettHewlett
Independent
Director
NeilCraig
Non-ExecutiveChairman
Alan Bougen (Founder)
Non-Executive Directorand
DeputyChairman
(Retiring 2017 ASM)
Luke Bunt
Independent
Director
SarahOttrey
Independent
Director
BOARDOFDIRECTORS
6
Annual Shareholders’ Meeting 2017
6

Financial results for
theperiod ended
12 months
to 30 June
2017
Audited
12 months
to 30 June
2016
Unaudited
15 months
to 30 June
2016
Audited
Revenue$156m$192m$231m
EBITDA*$19.8m$37.0m$39.4m
EBITDA % of revenue13%19%17%
Net profit after tax -NPAT$9.8m$18.1m$18.5m
NPAT attributed to non operating items$15.3m-$1.4m
NPAT excluding non operating items($5.5m)-$17.1m
Earnings per share NPAT (NZ Cents)23.74-46.91
Dividend per share (NZ Cents)2.00-18.00
Return on Capital Employed -ROCE5.8%-14.3%
*EBITDA: earnings before interest, tax, depreciation
andamortisation.
KEYF I N A N C I A LRESULTS
•Reported NPAT of $9.8m
•One-off, non-operating profit of $15.3m
primarily from the sale of Medihoney® IP
to Derma Sciences Inc. (now Integra
LifeSciences)
•Operating loss of $5.5m vs. market
guidance of a loss of $7.0m
•Policy of paying dividends out of
after-tax operating profits at a payout
ratio of 40-45%
-We have a number of attractive
M&A opportunities in front of us
-No final dividend in respect of
FY17
-Expect dividends will resume in
FY18
Annual Shareholders’ Meeting 2017
7

•FY17 net debt year end: $61.9m
-FY16 prior year end $84.0m
-HY17 $82.4m
•Two liquidity events raised $51.2m
-China Resources placement
$21.2m at $10.60 per share
-Derma Sciences Inc.; $30m
•$11m from share sale
•$19m from sale of IP
•Debt to equity now 38% (FY16 64%)
BALANCESHEET
Key Balance
Sheet
Ratios as at
30 June
2017
$’000
30 June
2016
$’000
Change
%
Total assets256,692243,2686%
Raw material inventory59,89564,509(7%)
Net debt61,92884,020(26%)
Net debt to equity ratio38%64%(41%)
Weighted average shares on
issue41,37339,3865%
8
Annual Shareholders’ Meeting 2017

SALE OF MEDIHONEY® IP ASSESTS
Annual Shareholders’ Meeting 2017
DERMA SHARES SOLD TO INTEGRA LIFE SCIENCES
(NASDAQ:IART)
-USD $7 per share -$11m proceeds
SALE OF MEDIHONEY® IP
-$19m proceeds for sale of Medihoney® brand and
associated royalties
-Retained royalty free unrestricted use of the
Medihoney® brand in perpetuity in over-the-counter
(OTC) markets globally
MILESTONES
-USD $2m when reach US $25m sales
-USD $3m when reach US $37.5m sales
9

MANUKAHONEYDEFINITION
10
•Industry is aligned
-Establishment of Apiculture NZ
-UMFHA® (UMF Honey Association) has 120 members
-Major players agree on most of the key issues facing the industry
•The Ministry of Primary Industries (MPI) has committed to working with industry
on the definition and we expect an announcement by the end of the year
•Comvita’s science team recently published a definitive scientific paper in
internationally recognised publication, ”Food Chemistry”. This paper was also
presented this month at Apimondia, the global apiculture conference
•Hopeful of agreement with MPI on the Certification standard shortly
This is a big deal for the Manuka honey industry. It will mean certification of all Manuka honey
leaving New Zealand
Annual Shareholders’ Meeting 2017

MANUKA HONEY –MYRTLE RUST
11
MYRTLE RUST
•Very low risk to industry
₋Nothing since our 27 June market update has
caused us to change our view.
•In Australia for seven years
₋No wild infections of Leptospermum species
reported
₋No impact on honey production
Annual Shareholders’ Meeting 2017

WELCOME TO
SCOTT
COULTER
CEO’S ADDRESS
12

YEAR IN REVIEW
MAINTAINED FOCUS ON STRATEGY
Annual Shareholders’ Meeting 2017
•Kept our focus in FY17 on re-shaping the
business to deliver on our long term
strategic objectives
-Sourcing our raw ingredients
-New product innovation
-Balancing our market growth between
East and West
-Acquisitions (China strategy)
13

Ben Shaw
ChiefMarketing
Officer
SimonPothecary
Chief Sales
Officer
Colin Baskin
Chief SupplyChain
Officer
SharonHollenstein
Chief Innovation
Officer
L E A D E R S H I PTEAM
STRONG TEAM: RESHAP E D AND BROADENED WITH A FOCUS ON COMMERCIAL
EXECUTIO N , HIGH PERFORMANCECULTURE AND E-COMMERCE
JulianneKeast
ChiefFinancial
Officer -Acting
7 years managing
finance forComvita
KateSelway
Chief People & Culture
Officer -Acting
7years in People & Culture
ScottCoulter
Chief ExecutiveOfficer
TBC
NewChiefDigital
Officerrole
An increasing number of sales are
made via digitalchannels
MarkSadd
Chief CommercialOfficer
M&A, Partnerships,Governancewith a
focus onChina JV, Apiaries and other
investments
Annual Shareholders’ Meeting 2017
14

G LO BA L T R E N D S
V I S I O N A N D ST R AT EGY
15

GLOBALTRENDS
THAT INFLUENCETHE NATURAL HEALTHMARKET
Consumersneed
to trust the source
of their foodsupply
Aging populations and
emergence of lifestyle
diseases, e.g., mobility
cardiovascular,diabetes,
antibioticresistance
Rapid growth of
e-commerce and
cross boarder
platforms
Consumers taking a
pro-activeapproach
towards managing
theirhealth
16
Annual Shareholders’ Meeting 2017
Comvita’s vision and strategy positions us perfectly to take advantage of these global trends

VISION
SOURCETOS H E L F
CLOSE, DIRECT LINKS WITH CONSUMERS IN KEY MARKETS
CONNECTED TO THESOURCE
NATURAL PRODUCTS THAT WORK, BACKED BY SCIENCE
TRUSTED
17
Annual Shareholders’ Meeting 2017

CONSUMER-FOCUSSED BUSINESS
DIRECTLY CONNECTED TO THE SOURCE
INNOVATION
ACQUISITIONS
EARNINGSFOCUS
18
Annual Shareholders’ Meeting 2017
COMVITA STRATEGY ON TRACK
$400M BY FY21

CO N N EC T I N G TO T H E S O U RC E
19

MANUKAHONEY
41,500HIVES
•Regional spread of
apiaries designed to
mitigate weather events
•Building Joint Venture
partnerships with strong
management to increase
growth
•Moving to land owner
partnerships utilising
Manuka plantation
opportunities
Annual Shareholders’ Meeting 2017
20

21
PANHANDLE STATION
KAKAHI VALLEY, OHURA
2,900HA DRY STOCK STATION
200HA OF EXISTING MANUKA
PLANTED 250HA FY17
1,250HA OF PLANTATION POTENTIAL
WILL TAKE UP TO 1,500 HIVES
Annual Shareholders’ Meeting 2017
21

22
MAKINO STATION Ltd.
MAKINO ROAD, RAETIHI
1,530 HA DRY STOCK STATION
700HA OF EXISTING MANUKA
800HA OF PLANTATION POTENTIAL
PLANTED 130HA FY17
Annual Shareholders’ Meeting 2017

23
AKIRA STATION
WAIRARAPA
Annual Shareholders’ Meeting 2017
430HA DRY STOCK STATION
400 HIVES ON EXISTING MANUKA
PLANTED 110HA FY17
WILL TAKE UP TO 500 HIVES
23

INNOVATION
STRATEGIC GOAL:
Transform how we do innovation at Comvita
-Faster growth of core bee product innovation
-Product diversification
•$2.2m of sales from new-to-the-business
innovation
-Eye Health
-Drinking Vinegar
-Reduced-sugar lozenges
•Expect sales >$10m in FY18
Annual Shareholders’ Meeting 2017
24

25
BUILDING A PRODUCT PORTFOLIO FOCUSSED
ON OUR CUSTOMERS CORE HEALTH NEEDS
Annual Shareholders’ Meeting 2017
BEE BASED PRODUCTS:
Manuka honey, Propolis,
Royal Jelly, Pollen
MEDIHONEY® MARINE & OMEGA OLIVE LEAF
MILK BERRY KIWIFRUIT PROBIOTICS
EXTEND BEE PRODUCTS
DRIVE CATEGORYGROWTH
EXPAND
25

MEDIHONEY® ADHESIVE
WOUND DRESSING
Annual Shareholders’ Meeting 2017
LAUNCH OF MEDIHONEY® ADHESIVE DRESSINGS
OCTOBER 2017
-Medical device approval (CE Mark) obtained in
New Zealand, Australia, Hong Kong and the UK
-USA launch (FDA version) early next calendar year
-Current market size for OTC adhesive wound dressings in
these markets alone is $1billion.
26

27
Annual Shareholders’ Meeting 2017
•Eye health is one of the largest health
concerns in Asia
-New Zealand blackcurrant has
excellent levels of anthocyanins
•Launched eye health product
-Targeted at young, working
professionals, sales already circa
$1m
•Good demonstration of Comvita’sbrand
strength, outside of bee products
•About to launch Macular Health product,
targeted at 50+ age group
EYE HEALTH
NEW ZEALAND -SOURCED BLACKCURRANTS
27

28
MARINE BIOACTIVES (including Omega 3)
THE MARINE BIOACTIVES PORTFOLIO IS DESIGNED TO ADDRESS KEY CONSUMER HEALTH
CONCERNS THROUGHOUT EACH LIFE STAGE
•
Omega 3 Gummies launched
•
New Omega 3 range to be launched next year using New Zealand manufactured
Omega 3 fish oil sourced from SeaDragon
•
Omega 3 fish oil market is USD $9.94b and expected to grow at 13.8% from 2015 to 2020 driven
predominantly by Asia.
Annual Shareholders’ Meeting 2017
Brain,
Mood,
Eye,Skin
Brain
development
(Eyehealth)
Brain development,
wellbeing formother
Brain, Mood
Eye, Beauty,Sleep
Brain, Mood
Eye, Beauty,Sleep
Heart, Sleep, Mental
Agility, Beauty,Mood
Brain, Heart,
Mobility/bone health,
Mentalagility
28

29
Annual Shareholders’ Meeting 2017
FRESH PICKED™OLIVE LEAF EXTRACT (OLE)
EXPANDING INTO
CARDIOVASCULAR HEALTH
•Targeting the three highs:
-Blood sugar
-Cholesterol
-Blood pressure
•Leveraging clinical trial results:
-Regular OLE intake may be associated
with a 9-14% reduction in
Coronary heart disease risk and a
20-22.5% reduction in risk of stroke
and heart attack
“The evidence for OLE improving cardiovascular health is compelling”
Professor of Medicine at UCLA in Los Angeles, USA,
Professor Matthew Budoff, Cardiologist

PREMIUMB R A N D I N G
•Brand refresh for Bee product range in
FY18
-Super premium positioning for
high end (20+) Manuka honey
range
-Broadening of range appeal at
the lower end (5+,10+) to
support Western market growth
-Anti-counterfeit initiatives
•Linkto premium branding video:
https://youtu.be/gQOILFClaik
30
Annual Shareholders’ Meeting 2017

Annual Shareholders’ Meeting 2017
KEY MARKETS
STRATEGIC GOAL: EAST-WEST BALANCE
•Australia and New Zealand
-Efficient, low cost business model will provide favourable sales leverage as the grey
channel recovers
-Building on pharmacy distribution
•Hong Kong
-Focus on productivity is starting to pay off, with a 37% increase in net contribution.
We expect strong sales growth in FY18
•Japan and Korea
-Grew 13% and 21% respectively
-Success in TV home shopping and duty free
•UK and Europe
-Grew 13% in GBP terms
-New listings in Boots, the Chemist and Holland & Barrett, the UK’s largest health
food chain
-Expect good growth in FY18
31

32
Annual Shareholders’ Meeting 2017
MARKETS (Continued)
•North America
-Will be a significant step up in sales and profitability across US and Canada
-Continue with online success in Amazon
-New distribution agreement in USA and Canada natural health markets;
expect to ship pre-Christmas
-Listing in 200 COSTCO stores in the US and 100 COSTCO stores in Canada
•COSTCO
-85 million members
-700 stores worldwide
-Top US retailer of organic food and wine
-Initial indications are sell through has been positive
•Our North American revenues excluding medical honey sales
to Integra LifeSciences will exceed $30m (prior year $3.7m)
32

12
ACQUISITIONS–CHINAJOINTVENTURE(JV)
CHINAISA KEYPARTIN OUR FUTURE GROWTH
THE CHINA JV IS AN IMPORTANT STEPPING STONE TO GET CLOSER TO OUR CUSTOMERS
•The JV is a circa $50m revenue business
•New leadership team appointed and
governance structure established
•Equity accounted not consolidated
•Clear strategic plan for growth
Annual Shareholders’ Meeting 2017
3333

WELCOME TO
MR ZHU
GUANGPING
Joint Venture Partner
CHINA
34

35
CHINA JOINT VENTURE
STRATEGY –PRODUCT
Annual Shareholders’ Meeting 2017
35
FY18FY19FY20FY21
+
TEST AND LEARN –NEW INNOVATION
LEVERAGE CAPABILITY IN BEE PRODCTS
+
LANCH OF NEW INNOVATION
FF
FOCUS ON BUILDING LEADERSHIP
IN BEE PRODUCTS

67
CHINA JOINT VENTURE
STRATEGY –CHANNEL
Annual Shareholders’ Meeting 2017
36
E-COMMERCE
-Strategic Partnership with JD.com and Tmall
-Expand X-border coverage
TVHS
-Expand number of channels
RETAIL STORES
-Expand stand alone stores inShanghai, Beijing,Chengdu
WHOLESALERS
-Actively manage 45 wholesalers who cover parts of China we
can’treach
PREMIUM RETAIL
-Expand distribution in Health and beauty, Pharmacy and
Hypermarkets with targeted product lines

37
CHINA ROAD TO SUCCESS
Annual Shareholders’ Meeting 2017
•Focus on core Bee
products
•Transition and integration
•Team build-up
•Introduction of new
products
•Grow e-commerce
coverage
FY17-18
•Launch new products
•Open new customers
•Geography expansion
•Increase brand
investment
FY19-20
•Transform from
honey relevance to
holistic health
products
FY21-22
37

O U T LO O K
38

OUTLOOK–October 2017
•Previous guidance (22 August):
-After-tax operating earnings for FY18 to be at least equal to after-
tax operating earnings of $17.1m achieved in FY16*
•Update to guidance:
-With first quarter sales ahead of internal budget at 35% up
on the same period last year, a solid recovery in the grey
channel into China and significant North American sales now a
reality, Comvitahas confidence in a profit greater than $17.1m
•Assumptions and risks
-Grey channel continues to recover
-Return to ‘normal’ honey season
-North America and South East Asia growth
-China Joint Venture contribution to future profitability
-Savings from FY17 partially reinvested in marketing and product
development to drive further sales
•A further update to this seasons honey harvest will be made early in the
new calendar year
*comparable 12 month periodunaudited
Annual Shareholders’ Meeting 2017
39

40
Neil Craig -Chair

FORMALITIES AND RESOLUTIONS
FORMALITIES
•Reports and Financial Statements
RESOLUTIONS
1.Appointment and Remuneration ofAuditors
2.Re-elect Neil Craig
3.Re-elect Sarah Kennedy
4.Elect Brett Hewlett
5.Elect Paul Reid
Annual Shareholders’ Meeting 2017
41

G E N E R A L B U S I N ES S
42

FAREWELL TO
ALAN BOUGEN
CO-FOUNDER
43

T H ANKYOU
44