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A2 Milk 1H profit tumbles 81% as listing costs, fees rise

A2 Milk 1H profit tumbles 81% as listing costs, fees rise, lodges ASX application

By Paul McBeth

Feb. 25 (BusinessDesk) - A2 Milk Co, which markets milk with a protein variant said to have health benefits, said first-half profit fell 81 percent on costs for its planned ASX listing, lodged today, and for hiring consultants.

Net profit dropped to $125,000, or 0.02 cents per share, in the six months ended Dec. 31, from $643,000, or 0.11 cents, a year earlier, the Auckland-based company said in a statement. That included $762,000 in one-time costs associated with the Australian listing, and a $1.4 million increase in other operating costs to $5.3 million, which was largely selling and consulting costs linked to business growth, it said.

Excluding those costs, earnings before interest, tax, depreciation and amortisation climbed 27 percent to $3.3 million as revenue rose 38 percent to $74.8 million, largely in line with Forsyth Barr's estimate for sales of $75.2 million and Ebitda of $3 million.

"During the period, the Australian business performed exceptionally well as it continued along its growth trend with sales and profit well ahead of the corresponding period last year," the company said. "In the UK, progress is being made on the implementation of the revised business model, having received broad product acceptance with a growing retail distribution base."

Last month A2 shareholders approved a change in the company's constitution, reducing the minimum number of New Zealand directors in preparation of the planned ASX secondary listing.

The company today said chairman Cliff Cook and director David Mair intend to resign ahead of the ASX listing. Deputy chair David Hearn will assume the chair and Julia Hoare will take on the role as his deputy, while the board considers the appointment of an additional independent director.

A2's Australian and New Zealand unit lifted revenue 39 percent to $72.8 million and more than doubled Ebitda to $4.9 million in the half. Its Chinese unit reported a 41 percent drop in sales to $1.1 million, and turned to an Ebitda loss of $610,000 from positive Ebitda of $660,000 a year earlier after the world's most populous nation implement a new regulatory regime for infant formula.

The UK and USA segment reported revenue of $892,000 and an Ebitda loss of $1.9 million. A2 anticipates a North American launch in the fourth quarter of this financial year.

A2 reported an operating cash outflow of $4.1 million, almost twice the $2.3 million a year earlier, because of an increase in working capital from the growth in infant formula and milk sales. It had $9.9 million in cash and equivalents as at Dec. 31.

The board didn't declare an interim dividend.

The shares last traded at 51 cents, and have dropped 12 percent this year.


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