H&H Group delivers first half business growth in 2022 Interim Results led by strong revenue across 3 product segments

August 31, 2022 ndowd

Group revenue grew 9.8% on a reported basis to RMB5,955.4 million in the first half of 2022
Adjusted EBITDA declined 1.0% with a stable 17.7% adjusted EBITDA margin
Adjusted net profit declined 26.9% due to higher finance costs from incremental debt stemming from the Group’s Zesty Paws acquisition and net profit on a reported basis declined 5.2%
The Group successfully drew down a 3-year term loan facility, refinancing all existing loan facilities to improve its capital structure and liquidity position
Interim dividend payout ratio of 30% of adjusted net profit announced
The Group stabilised its market position in the infant milk formula business with a 5.7% share, and achieved sales turnaround in probiotic supplements, in Baby Nutrition & Care (BNC), a segment which contributed the largest portion of the Group’s total revenue at 53.4%
Adult Nutrition & Care (ANC) delivered solid revenue growth of 14.9% on a like-for-like (“LFL”) basis and Pet Nutrition & Care (PNC), bolstered by last year’s acquisition of Zesty Paws, saw 35.4% growth on an LFL basis as both segments retain momentum in core major markets whilst expanding into new markets in Asia and the US
Revenue from mainland China returned to a growth trend, achieving growth of 3.4% on an LFL basis and accounting for 73.8% of total Group revenue
Revenue from Australia and New Zealand (ANZ) grew 24.0% year-on-year on an LFL basis, with robust revenue growth in all channels
The Group made purposeful strides in its sustainability progress, including maintaining its MSCI ESG Research rating of ‘A’ whilst moving closer to achieving B-Corp certification

Global family nutrition and wellness provider, Health and Happiness (H&H) International Holdings Limited (“H&H Group” HKSE: 1112), has today announced its interim results for the six months ended 30 June 2022, delivering profitable growth for the first half of the year.

During the Interim Period, total Group revenue grew 9.8% year-on-year (YoY) on a reported basis to RMB5,955.4 million whilst net profit declined 5.2% on a reported basis to RMB475.1 million. The Group saw positive revenue growth across its two business segments – Adult Nutrition and Care (“ANC”), and Pet Nutrition and Care (“PNC”) whilst seeing recovery in some parts of the Baby Nutrition and Care (“BNC”) segment despite facing challenging conditions, including rising inflation, supply chain issues, and industrial challenges.

H&H Group’s Chief Executive Officer and Executive Director, Laetitia Albertini, said the business was pleased to deliver positive results, fostered by a combination of brand strength and product innovation, along with proactive efforts to expand the Group’s reach to new and existing markets.

“These interim results have placed the Group on a strong trajectory for the remainder of 2022. Across our three business segments, we have built momentum that is paving the way to accelerated profitable growth despite encountering various challenges and impacts. This speaks volumes to the resiliency of H&H’s brands, our product quality, and our consumer-led approach to innovation and marketing within our product portfolios,” Mrs Albertini said.

The Group’s BNC segment is recovering, reporting a 3.5% decline, as it continues to grapple with long-term structural challenges it is facing in mainland China, particularly in the infant milk formula (IMF) category. Whilst the IMF category saw a 3.1% decrease YoY, revenue from probiotic supplements increased 6.4% to compensate. Despite the obstacles the industry is grappling with, at 53.4% the BNC segment is the Group’s largest contributor to overall revenue.

“We cannot overlook the challenges our BNC segment is encountering in mainland China, from declining birth rates to increasing competition and rising inflation. These are industry-wide issues that we have navigated well through prioritising a channel expansion strategy, as well as branding initiatives and focused investment in consumer education. We have also continued to gain market share in the super premium cow milk IMF and goat milk IMF markets, both of which represent a major part of our IMF business. We have stayed at the forefront of this segment of our business, attentive to changing consumer needs whilst capitalising on new opportunities for growth,” Mrs Albertini said.

The ANC business segment saw its revenue grow 14.9% on a YoY LFL basis to make up 34.4% of the Group’s overall revenue in H1. The Group continued its ANC expansion in Asia – over the past few years it has entered several new markets, including Hong Kong SAR, Singapore, Malaysia, Thailand, Indonesia, and India, and, most recently, Vietnam. Swisse continues to strengthen its No. 1 position in the beauty supplement brand category in Singapore.

Meanwhile, the Group has seen major success and strong revenue growth in its PNC segment, which saw a 35.4% increase YoY on a LFL basis. Pet supplements and nutrition brands, Solid Gold and Zesty Paws, acquired by the Group in 2021, contributed 12.2% to the Group’s overall revenue as they continued their online and offline expansions in both the US and mainland China markets. Zesty Paws maintained its leading position in both Amazon and Chewy platforms and has also entered Costco online stores in the US. Zesty Paws and Solid Gold are now present in more than 7,744 stores and 4,200 stores respectively across the country, including major chains, such as Walmart, Target, Petco, and PetSmart.

“Between our ANC expansion into Asia and strong double-digit revenue growth in PNC, we are setting the stage for growth with our range of premium brands. We are thrilled to see our core markets delivering gratifying sales performances whilst we are only at the start of our journey of introducing Swisse, Biostime, Zesty Paws, and Solid Gold into burgeoning markets around the world, where we are seeing promising growth potential for our brands,” Mrs Albertini said.

Regional Highlights
Mainland China accounted for 73.8% of total Group revenue, led by a 6.5% increase YoY in sales in Biostime branded probiotics, a 12.9% uptick in the ANC segment and a 108.6% increase in the PNC segment. In the BNC segment, there has also been an increasing appetite in mainland China for goat milk IMF – the Group reported 7.5% growth for this product category in H1.

Mainland China accounted for 61.1% of total ANC revenue, driven by robust normal trade sales in the region. The Group reported net sales of RMB167.9 million in the first half of 2022 in its PNC segment. Solid Gold is garnering momentum as it ranked No. 1 in the imported cat food category on the Tmall platform and No. 2 in the premium cat dry food category whilst the brand received seven new licenses to sell pet food products on offline channels in the country to propel its growth to over 5,000 pet stores and hospitals.

“Our H1 results reveal a steady turnaround for H&H Group in mainland China, where we continued to deliver healthy revenue growth in response to consumer demand for quality products for the whole family despite supply chain challenges. It is in this market that we have seen major returns for our strategic efforts in branding initiatives and investment in consumer education. We anticipate this payoff will continue well into the rest of 2022,” Mrs Albertini said.

Outside of mainland China, Biostime-branded business continued robust double-digit growth of 22.0% in France as it maintained its No. 1 ranking in the organic IMF and goat IMF categories in the pharmacy channel. Biostime,

Source: RealWire

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