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Comvita Announces Solid Half-Year Net Profit

Mon, 26 Jul 2004

Comvita Announces Solid Half-Year Net Profit

Comvita Limited has announced a solid half-year net profit after tax of $673,900 for the six months to June 30, an increase of 11.5 per cent over the corresponding period last year, while total revenue for the half year was $13,9 million against $10.9 million for the corresponding period last year.

Earnings per share for the same period amounted to 6.88cps compared to 6.58cps for the corresponding half year based on a weighted average number of shares on issue at the time.

The EBITDA, or cash earnings before interest and tax, for the half-year was $1.96 million, an increase of 53 per cent over the 2003 half-year figure.

Confidence in the company that won the large business sector award at the Environment Bay of Plenty Sustainable Business Awards in June is reflected in the current strong growth in its share price.

Announcing the result in his half-yearly report, Comvita chairman and recent recipient of the New Zealand Order of Merit, Bill Bracks, says the net profit was 7.5 per cent ahead of projections.

"It was a particularly satisfying result considering the fluctuating trading conditions generated by such events as exchange rates and international terrorism impacting on tourism," he says.

"Although the 21 per cent increase in revenue was less than forecast, Comvita enjoyed better margins than expected, significant foreign exchange gains and reduced costs to deliver better than expected net earnings."

Comvita's Board has declared an interim dividend of 2cps (ex date August 13) payable on August 27. In line with expectations, this represents 38 per cent of net profit after tax. Full imputation credits will apply to the dividend. The Dividend Reinvestment Plan will be reinstated for the upcoming interim dividend after being suspended for the 2003 year final dividend payment during March, 2004. The DRP strike price is calculated at 95 per cent of the average price traded during the 60 days preceding the record date.

Cashflow generated during the six months was a deficit of $1.68 million - a result of increases in inventory and accounts receivable which in turn resulted from a record sales month in June.

Comvita's strong result follows the successful completion on May 17 of an SPO (Subsequent Public Offering) of 3,658,537 shares. The SPO was managed by ABN AMRO Craigs and attracted wide interest, increasing the shareholder base from 255 to approximately 900.

The company issued a prospectus in April, projecting earnings of $1.58 million after tax for the full year. The Board remains optimistic that the prospectus forecasts will be met.

Bracks says the company's move onto the NZAX proved timely and Comvita's share price has seen strong growth since the SPO.

"The volume of shares trading since then has increased by more than 300 per cent. The main purpose of the capital raising was to strengthen the balance sheet, with the resulting shareholders funds ratio increasing from 33 per cent to 65 per cent.

"This positions the company well for growth in the short to medium term, with the Board actively seeking opportunities which are a strategic fit for the company."

Acquisition of the Apimed medical honey business is yet to produce tangible benefits for shareholders. While Apimed continues to move toward commercial success, progress has been slowed by regulatory delays and increased operational and quality disciplines required for medical devices. Commercial returns are expected to show steady growth from next year.

Comvita's UK partner, Brightwake Limited, successfully launched a manuka honey wound dressing in March. It has drug tariff approval through the National Health Service and is being successfully marketed to hospitals and pharmacies in the UK.

A new research programme between Comvita and Crop & Food Research Limited gained support from the Foundation for Research Science and Technology, and the acquisition of Bee & Herbal Limited has given Comvita greater operational flexibility in the procurement, storage and supply of its flag-bearer product, manuka honey.

Although beekeeper production of manuka honey last season was below average, Comvita's policy of holding higher stocks will enable it to take advantage of increasing offshore demand.

Despite challenging domestic conditions in the first six months of 2004 with Asian tourism numbers down and a strong dollar impacting on purchasing power, strong growth in exports to Hong Kong, Taiwan and Japan demonstrated the success of Comvita's export activity. Offshore highlights include securing the first order from China, where product will be retailed through duty free outlets, and opening a new office in Taiwan.

Bracks says while the general outlook remains fairly volatile, Comvita is confident of meeting its profit targets for the year.

"Exports to key markets continue to grow and new business development with Apimed wound dressings will continue to broaden our base."


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