McPherson's Limited (MCP) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to McPherson's Limited Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Laurie McAllister. Please go ahead.

Thank you. And welcome, everyone. And great to have our full year audited FY '20 results release. You'll be all happy to know there's no change from the unaudited results that we gave a bit of a sneak preview to in mid-July, so the business is performing very strongly. I'll just go to Slide 2. And I'll do an intro in a couple of pages. And then I'll hand over to Paul, our CFO; then hand over to our Global Marketing Director, Donna Chan; and Lori Pirozzi, who heads up all of -- our sales director for the majority of the business, for about 90-odd percent of business. Then David will take us through -- Head of Strategy, Innovation and Export and International and will head up a discussion on how we're traveling, with some of the exciting things we've got going in that space. And then I'll come back and close up, and then we'll open the floor for Q&A. So I'll -- I'm just going to go to Slide 3. So one thing I do like as a CEO is to kind of maintain continuity. And we do have continuity and great support from our management team, our shareholders, our Board and our partners; and that's in health, wellness and beauty. I think you'll see a slight tweak as we go forward, that through this COVID-19 we're definitely going to double down on health and wellness and we'll continue to drive our beauty business with our partners but also look at the role of sustainability across all 3 of those areas as well as our people development. So no change, big markets, big growth rates, good margins. And the sustainability of health and vanity, frankly, is not going away through whatever period we've been over the last 3 or 4 years. So continuity at the heart there. I'll just now go to Slide 4. Thank you. So again, our top 10 haven't changed. You'll see some bolded language there, text font, but it's about really focusing the business. As you know, we've offloaded many of the other businesses through the years. They weren't quarters. And we've now got a very, very strong portfolio, and we're making sure that, that sustainability in that portfolio is really strong. And the people and the expertise and capability within that is very strong. Number two is you've seen Donna's team in particular do an amazing job in just revitalizing some sleepy old brands into maintaining a #1 position, and 5 out of 6 of our brands in that category and segments. So very, very strong. Again, working supply chain, finance and all the teams really coming together, including R&D, to make sure that we have the right COGS, et cetera. Our balance sheet is very healthy, and Paul will take you through that at length. Customers are king, obviously, as is cash. But again, between the grocery and pharmacy customers, Chemist Warehouse, Priceline, TerryWhite Chemmart and independent pharmacies as well, so our grocery customers such as Kohl's, Woolies and Aldi, Metcash, very strong relationships, very strong trading terms and really growing the pie together and, if anything, came together even stronger through this difficult period. Integrate and grow our own brands. So we acquired these brands [ about 5 now, 6 years ] ago. And then -- and they are looking very, very interesting for us, which is fantastic given that -- and Lori and Donna will go through that in detail, and really driving a lot of incremental share and growth and profitability; and distribution and potential opportunities, obviously overseas, especially Dr. LeWinn's, at the China and beyond basis. To that point, it's probably a good segue, #6, creating a China-facing business. You've probably seen in the announcement we put up this morning Livia gave a lovely quote as to our relationships that we have are long lasting and very, very, very meaningful, of course. And the fact that we have a joint venture with a partner as a Chinese-owned joint venture partner versus other people that might be struggling with some of the optics in the news at the moment basically says, "Wow, you're with the right players. You've got the right people." And we're not going through small local Aussie entities that may be discredited through some politics. So we're with a very strong global Chinese player. And we're very, very comfortable and supportive of that relationship; and that just goes from strength to strength. Next, Australia -- sorry, New Zealand and Singapore. Again, New Zealand had a cracker of a start to the year. We've got some good management we've put in there last year which -- to turn that business around to be back in the black and growing very strongly. And we'll actually anticipate quite strong EBIT growth for us through 2021. Singapore, we're soon to announce a new GM. And the way we did last year with New Zealand is they're probably a year behind but bringing in great talent and a good portfolio. So we're feeling quite good about those 2 businesses that were causing us actually a lot of drag. It was almost like the anchor and the boat and was just dragging us. So that's good. Efficiencies. We've got a very live project on efficiencies across supply chain to ensure that we continue to take costs out, be more efficient and deliver better services to our consumers and customers. So we can probably share more of that in February, but we've got a very live project that's very much supported by the Board. And there's a little bit of CapEx and a little bit of investment in there to support that, but it's quite meaningful and return for savings for the company. And then last but not least is we've, frankly, struggled on getting the big M&A deal across the line. And in some ways, most, just about all of our top 10 investors kind of say, "Good on you. You've been very critical," to the team because we'll get a very healthy balance sheet. And we haven't just jumped at shadows. We've been very cautious and we've got a very healthy balance sheet, and now we're finding a lot more people starting to knock on the door and look for our support. So we need to be humble about that because we're very, very healthy. Some people are not so healthy in this situation, so we need to be humble but be opportunistic and make the most of it. So we are hoping to see some good moves in that space, but I would say we have really not cracked the code on the big deal as of yet given all of our capacity and given our healthy balance sheet. That's still very high on our agenda. And to that point, I'll maybe just hand over to Paul Witheridge, our CFO, Global CFO, and hand over to Paul to talk through the financials. So we're going to Slide 5.

Thanks, Laurie. And good morning, everyone. Just to firstly reiterate Laurie's point that the numbers we're presenting today are consistent with the figures we presented on the 28th of July as preliminary numbers. We're just obviously providing a lot more color. So let's move to Slide 6, where we have a breakdown of our sales revenue by product category, and the headline there is that our sales revenue from owned brands did increase by 16% in comparison with last year. And again, a key driver of that was 59% growth in our skin, hair and body category from $40 million in FY '19 to $64 million in FY '20. And as we pointed out back in late July, that's driven by really strong export growth and also strong domestic growth in the Dr. LeWinn's brand. So export was up 130% for Dr. LeWinn's, and the domestic channel is up 18% for Dr. LeWinn's. So very strong growth there. Secondly, in the essential beauty category, which covers our Manicare, Lady Jayne and Swisspers brands, we did achieve 1% growth in a really challenging environment. And that was driven by a 3% growth in Manicare, as what they're focused on is home beauty, offset to a degree by some decline in Lady Jayne, as people spend less time, I guess, looking after their hair in lockdown. And we had a result from Swisspers which was broadly in line with prior year. In the household essentials category, which is dominated by Multix, we had growth of 2%, and Multix contributed 4% growth in that category. And of importance, you will recall that we actually had a fairly solid decline in the first half, so to come in with [ a go graph ] for the year obviously implies really strong growth in the second half, which is what we had, 23% growth in second half sales with the Multix brand. And as you know, a lot of that was driven by pretty strong demand through that COVID-19 phase. So again just to reiterate, 16% growth in owned brands from $160 million to $186 million. Of lesser importance, we have indicated there the situation with our agency and private label businesses. Agency did fall by 44% due to the termination of our Trilogy and Karen Murrell agencies. That accounts for all of that decline. And our private label business declined slightly due to some reduced volumes in the Aldi business. I do note that we actually had a much stronger second half than the first half. So there was growth. There was slight double-digit growth in the second half that private label filed. So the headline is that our overall sales did increase by 6%, a good result in the current environment. If you exclude those terminated agencies, we were up 11% from $199.3 million to $222.1 million. Moving on to Slide 7. I just have here an indication of the rapid growth we've experienced in Dr. LeWinn's China. And you can see there that we've grown from virtually nothing back in 2016 to $38.2 million for the year just ended. So that represents 17.2% of our total sales, so clearly massive growth in that brand. Moving on to the next slide, Slide 7 (sic) [ 8 ]. We've got really strong growth again in our domestic sales for Dr. LeWinn's. So not only is export growing, but you can see on that graph that the domestic market has almost doubled from $10.9 million to $19.3 million over that 5-year period. And the percent of sales has almost doubled from 4.7% back in 2016 to 8.7%. So moving on then to Slide 9. As you know, the year has seen the realization or the vesting, if you like, of ABM's 51% ownership of the Dr. LeWinn's China-facing intellectual property that we have in our business. That's because ABM achieved the minimum qualification criteria of sales of $35 million in a 12-month period. So understandably, we're getting questions around, well, what does that mean for the business going forward, and we thought we'd just put this little diagram in to explain it to you. And the key point -- the 2 key points are, firstly, with regard to our existing business today, that there is no change. So our current product range and, for that matter, future products that are developed by our team for the Australian and global markets continue on the same basis that they have, i.e., McPherson's will be recording 100% of the sales and EBIT associated with those products which are supplied through to ABM. So a key point, no change for the existing business as it is today, bearing in mind that we've had a lot of success developing product for the Australian consumer into the China market that's driven this business to date. What has changed is new and incremental. So we have established this JV to tap knowledge that ABM has specifically of the Chinese consumer, and what we will be benefiting from into the future is that profit from this new incremental business that we'll be developing jointly with ABM. And with regard to those particular products, they will flow through the JV, as I've depicted there, with [ practically ] 49% of that net profit after tax flowing through into the accounts, as equity-accounted earnings into the accounts of McPherson's. And I've also indicated on that graph that 1% of sales that are made by the JV through to ABM flow back into the JV to help subsidize future product development. So it's new and incremental and exciting for the business as we enter a new phase with ABM as a great partner. So moving on to Slide 10. This is really, as you see, a graphical depiction of what's happened to our sales when it's viewed FY '20 versus last year, again totally consistent, of course, with the table I showed you a few slides ago but indicating it visually. So you can see there that, excluding Trilogy and Karen Murrell, we're moving from a base of $199.3 million to $222.2 million. And the key driver there, not surprised, $21.5 million growth in Dr. LeWinn's export sales through to ABM. We've got a $3 million increase in our domestic sales of Dr. LeWinn's. We've got the $1.9 million increase in sort of Multix sales into the domestic market and also a $1 million increase in sales of Manicare products. And that's offset by primarily a decline in a business which is not core to us. So the private label business is something we do to help our customers. That's been the area of decline, $3.2 million, as I said, primarily through the -- Aldi. So moving on now to Slide 11, where I have a graphical representation of the movement in our underlying profit before tax for the year, moving from $17.3 million, excluding the impact of Trilogy and Karen Murrell, through to a reported figure of $22.8 million. No surprises that the key driver there is the increase in Dr. LeWinn's export contribution, $9.6 million contribution from the sales that we've made through to ABM. The other key movements: Firstly, we had the benefit of decreasing commodity prices of $3.3 million. That's primarily driven by much lower resin cost in FY '20 than FY '19. We're all aware that crude oil as a key input to resin productions fell significantly during the year due to general economic pressure and COVID-19. Due to the success of the business, there has been an increase in short-term and long-term incentive expense of $1.3 million. We've got an increase in the seed investment in our JVs of $1.4 million. We had a decrease in our Singapore and New Zealand contribution of $2.3 million, again largely impacted by COVID-19, particularly in Singapore but also in New Zealand that went into a pretty significant lockdown phase. Currencies did cause an adverse impact of $4.3 million, and it's important to think about that in the context of commodities. Whenever anyone asks me about currency movements, I always refer to commodity as well. So really the net impact in our business was fairly slight, [ about $1 million slide, less than 5% ] of our overall profitability, during the year. And they're the key movements in our profit before tax. So moving on now to the next slide, which is Slide 12, with a little bit of information on our balance sheet. Pleasingly, our net debt remains very low at $9.2 million, excluding lease liabilities, and that represents a very low gearing of 9.3%. And that is low despite some key additional investments we made. We put another $3 million into Aware as a very important supplier to our business of [ our care ] products. It's where our growth is, so it's very important we have a capable, stable partner as we have in Aware. So we now have a $6 million investment in that business, which represents about 10% of the Aware business. We also invested an additional $2.7 million in our JVs over the 12-month period. That represents potential for our business into the future, of course. So moving on to the next slide, which is a representation of our cash flow. Again, we had really strong underlying operational cash flow, 103% cash conversion, clearly very good…

Slide 13, everyone.

That is Slide 13, yes. Sorry, Laurie. And we had -- an important point here is we had vastly improved second half '20 underlying cash conversion, and this is due to seasonal factors. So we had very strong second half post-Christmas customer receipts; and also we had a strong reduction in inventory, net of trade payables, over that second half period. So key callout there is 103% underlying cash conversion and operating cash flow of $19.3 million. Moving on now to Slide 14, which is a slide in relation to our ordinary dividends. We -- the Board has declared a final ordinary dividend of $0.07 per share which is fully franked. That's an increase from the $0.06 that we declared last year, for the second half. It takes our full year ordinary dividend to $0.11 per share, fully franked, last year $0.10 per share, noting that we also had a $0.02 per share interim special dividend last year. It's a payout ratio of 72%. Our policy is to paying out 60% basically where our balance sheet enables us to do. So clearly we have a very strong balance sheet so as to maintain that high payout ratio as we have done. That final dividend is payable on the 24th of September, roughly 5 weeks away. And we've retained the dividend reinvestment plan at a 2.5% discount to encourage investors to keep their money in the business. We do plan to make growth investments in the future, and that capital will be deployed for those growth investments. So I will now move to Donna. We're moving on to Slide 15, a picture of core brands. So Donna Chan, our Marketing Director, over to you.

Thanks, Paul. Good morning, everyone. Today, I'd like to take you through our results of our core brands as well as share with you our upcoming growth plan. So moving on to Slide 16. The McPherson's owned brands portfolio has really delivered some strong results in fiscal year '20. Dr. LeWinn's and domestic market grew by 21% in the pharmacy channel, far outpacing [ categ ] growth of 4.1%. Manicare grew plus 9% and extended our market share by 1.3 percentage points. Lady Jayne drove [indiscernible] growth and achieved 1 share point gain. Swisspers cotton outperformed private label, growing plus 7.3%, and extended our market share to 59% in groceries. Multix continues to lead in sustainable offerings and bag [indiscernible] with over 70% share in this segment and growth of plus 44%. And A'kin maintained our share within a competitive [ pharmacy naturals ] category. So moving on to Page 17. What you can see here on Page 17 is that our McPherson's portfolio has really been resilient during COVID. We saw a shift in the retail trade to grocery and consumers working from home, which has significantly benefited the Multix brand with increased home baking, increased need for kitchen tidy bags and more people cooking at home. Manicare also benefited as we supported consumers with new DIY beauty routines online. Cotton [ was then optimized ] during COVID with consumers stocking up on the trusted Swisspers brand. And strong demand continued for Dr. LeWinn's in China. What's most pleasing with our China business is that we're building a brand in China. So we've got multiple hero SKUs, [ as we said ], not just 1 or 2. Moving on to Page 18. Innovation is a key growth driver to our success. In fiscal year '20, our rolling 3-year NPD results contributed to over 28% of our revenues. We continue to deliver new products that achieve #1 status in the pharmacy channels, new products that appeal to both the domestic and China markets and first-to-market new technologies. We're absolutely committed to increasing our investments in R&D capabilities. 4 years ago, we started with 3 R&D specialists. Today, we have 13 talented experts from diverse fields. In addition to this, we've expanded our capabilities with external partners and work relentlessly to ensure our products are registered across multiple international markets. Not only are we delighted to see our current success, but we're also extremely excited about the 200 projects that are in our current innovation plans. Moving on to Slide 19. Leveraging key macro trends will drive our future growth. As you know, we've enjoyed tremendous success in China with the Dr. LeWinn's brand. Our #1 hero product, triple-action day defense, recently won [indiscernible] awards, which fields new consumers to the brand. Our innovation program continues to deliver new hero products. Consumers increasingly take a proactive approach to the beauty regime. There is an increasing trend where beauty and wellness converged. And in the next few months, we'll be launching the Dr. LeWinn's inner beauty collagen shot. Increasingly, consumers are looking for efficacious natural products, [ and soon we'll be ] launching a scientifically proven volumizing shampoo and conditioner and optimizer. The Multix and Swisspers brands are leads in driving sustainability and with a new respective category. And you will see new products coming out in the coming months to address this important consumer [ need ]. And lastly, COVID has had a significant impact on consumer behavior, creating new norm, which our Multix and Manicare brands are well placed to support. Moving on to Slide 20. As our world rapidly changed, the McPherson's team has risen to the challenge to review our growth opportunities through a different lens; and [ to stake the odds ] using flexible, adaptable and agile mindset. We identified 12 key projects; created an agile, cross-functional working team [indiscernible] to bring to life incremental opportunities ranging from $50 million (sic) [ $50,000 ] to $3 million. Our opportunities included everyday hygiene new product developments across our core brands as well as incremental channel and portfolio expansions. I'll now hand over to Lori, who will take you through our channel plans and share with you our exciting opportunity that is being realized from the think-beyond team.

Thank you, Donna. Good morning, everyone. If we move to Slide 22. Before I share what's on the horizon, I'll just touch on the performance in our domestic channels for FY '20 and throughout the COVID pandemic. You can see from a scan perspective McPherson's continues to lead in the majority of categories it plays in at channel level. In total market, our beauty accessory brands Manicare, Glam and Eylure collectively grew at 6.7%, outperforming the category by 1.5x. In pharmacy, our 3 skin care brands had a combined growth of 19%, which is 4.5x faster than the category itself. As already mentioned, Dr. LeWinn's was a key contributor here; and its performance led to positive outcomes at shelf, with spike in planograms up by 33% in Priceline and 25% in Chemist Warehouse, which we started to see implementation of in market from April. And in grocery, as Donna mentioned, Swisspers cotton outperformed the category by 1.6x. In grocery we also had a focus on range and portfolio management, which improved profitability for key brands, which was a key driver for us in FY '20. Moving to Slide 23. Contributing to these results, undoubtedly, was a continued focus on execution from gaining real estate to implementing innovation launch and customer investment plans for sustainable growth. From a real estate perspective, we continued investment in permanent and promotional off-location displays to disrupt the path to purchase. On shelf, over 18,000 incremental distribution points were secured along with gains in shelf space for Manicare, Swisspers and foot care in grocery; and as already mentioned, Dr. LeWinn's in pharmacy. Donna, again, has touched on the success of our innovation. And in market, we launched some of these as customer exclusives or first to market to provide a point of difference and further build partnerships at a strategic level. Our customer investment strategy this year included a step change with a stronger focus on customer online vehicles. If we move to Slide 23. What we also saw during -- or 24, sorry. During COVID, the online channels experienced exponential growth of over 40%, which accelerated our plans with targeted online-only retailers to expand our availability as a priority during this time. New customers were onboarded, such as Oz Hair & Beauty; as well as ranging of over 120 additional products across 4 online customers. And as previously mentioned, in existing customers we steered our investment via trading terms towards online vehicles by an additional 30% versus prior year. Expansion, a major growth pillar. And we've strengthened partnerships with existing customers in additional channels, including Woolworths B2B strategy with Multix and Chemist Warehouse China for A'kin and Revitanail, which are key building blocks for future growth with our domestic partners. As behaviors changed and we thought beyond COVID, opportunities for incremental expansions into new channels were pursued, which saw a select range of A'kin accepted in Foodstuffs New Zealand. Foodstuffs, for those of you who aren't familiar with it, hold 55% of the share of the grocery market in New Zealand. And we first launched in their stores in June. The penetration in the market of core brands remains a fundamental focus. And in FY '20, we saw core range compliance improve by 10% versus FY '19 in our independent customers, further demonstrating our resilience in these channels and the strength of our relationships. Now changing gears on Slide 25 to the outlook of -- for ANZ in FY '21. Our strategic growth pillars remain unchanged. We continue to focus on range and investment optimization and execution to drive the core and to provide a platform for innovation success and profitability, albeit in a very different environment. The most exciting and our largest growth pillar is expansion, and I'm pleased to say that we already have a number of outcomes secured already in motion in market. In New Zealand, more brands will expand into the grocery channel with Lady Jayne, Swisspers, Moosehead and Multix. And in pharmacies, the organic growth of Chemist Warehouse in New Zealand provides great opportunity for growth. New channel expansion can also be expected, including hardware in New Zealand with Multix; and domestically in online retail, with 4 new retailers on the horizon and over 35 additional products to be uploaded in coming months in both hair and beauty in Catch. Kotia, one of our joint venture brands, will also gain greater presence in new customers, including Blooms The Chemist. And in October, as part of our think beyond strategy, we will also see a select range of A'kin launch in Woolworths, Australia. Moving to Slide 26. You can see here with naturals a huge attractive category $100 million, growing at 44% in grocery. Making A'kin available will deliver greater accessibility and scale for the brand. We have a clear channel strategy across all 4 domestic channels to foster growth. With our confirmed strategic partnerships in grocery with Woolworths in Australia and Foodstuffs in New Zealand, we'll see over 5,000 incremental distribution points delivered for A'kin. And we look forward to seeing this grow even further in coming quarters, with some great brand momentum for A'kin in the domestic channels. With that, I'll hand over to David, who will take you through the export strategy.

So thanks, Lori. So as you've already seen and heard, in FY '20, the export business continued to really deliver exceptional growth for McPherson's. So looking at Slide 28. The strategy has very much been aligned with ABM, and it's really focused on sustainable growth. In 2020, Dr. LeWinn's in China delivered the strong 133% increase versus prior year, an incremental $21.5 million in wholesale sales versus fiscal '19. They really achieved this by expanding the number of hero products or SKUs from 3 to 5 and therefore broadening the brand's appeal to the 5 million ABMers. Our strategy has also been to accelerate the number of product innovations hitting the China market. If you're familiar with the market, you'd understand that frequent innovation is really critical for skin care there. And Dr. LeWinn's was able to deliver 4 new SKUs. Often, the cross-border e-commerce channels' platforms are as much about delivering content and communication as they are as actual sales, so the outcome was to expand Dr. LeWinn's across multiple touch points, new platforms; and develop more opportunities for ABMers to connect with the brand. In 2020, we increased the frequency and sophistication of how to reach the ABM network, increasing the number of events, the types of engagement, which has gone on to develop a loyal following for the brand. On Slide 29. What's really exciting is that ABM as a company continue to expand and grow, achieving ever greater milestones and business success. It's really hard to believe that they've only really celebrated their third anniversary for the launch of the platform. They now employ over 1,200 people across 4 global locations. Their network continues to build, with more than 5 million ABMers in multiple countries. As the ABM business model grows, they have started to employ a multichannel strategy, including the evolution from purely online into offline. And finally, ABM has aggressive geographic growth plans that will see that their presence expands to Oceania, New Zealand, North America and Southeast Asia. On Slide 30. This really provides the growth trajectory of Dr. LeWinn's in China. And it's a real testament to the strengths of the McPherson's and ABM relationship. That's jointly in our joint approach to innovation, strengthening the portfolio and building engagement in the Dr. LeWinn's brand. Starting with only 1 hero SKU back in fiscal year '17, the business has strengthened in revenue and scope, achieving more than $37 million in FY '20, expanding to the 5 hero SKUs we have today. On Slide 31. Major ABM event promotions provide a real litmus test for brand health, and Dr. LeWinn's has maintained its top 3 positions within the ABM portfolio brands. The WeChat search history demonstrates the growing awareness for the Dr. LeWinn's brands, with relevant spikes at key periods aligned with those key event promotions. The brand is becoming less and less reliant on a single product or SKU as new innovation resonates with our ABMers. On Slide 32. The big promotional events continue to drive results for ABM. ABM has increased its content development around the events building anticipation and setting up the brand in its portfolio for every success. Most recently, the June Daigou festival, an ABM-led event, delivered the most successful result to date. Through the promotion, Dr. LeWinn's maintained its #3 position, with 2 products in the top 10; and sold more than 500,000 units over the promotional period. And finally, on Slide 33. McPherson's relationship with the Aware Group underpins the success of Dr. LeWinn's and ABM in China. Aware recently produced their 1 millionth unit in Australia and now accounts for over 25% of all of the Dr. LeWinn's units produced. With further tech transfer underway, this relationship will only grow stronger. The strategic alignment with Aware has -- was strengthened by the progressive increase in equity share that MCP holds, having grown to 10% in FY '20. I'll now hand you back to Laurie McAllister for the summary.

Okay. So if we just move through to Slide 35. And I think, guys, all in all, a great effort. We did this in about 32 minutes. So it's 11:07. We usually take a lot longer. So we've cut it down to 28 acts of slides even though there was 36 slides. The other 8 slides were just bridges. So we've kind of done 28 slides to allow some Q&A, but a great team of people, as you can hear from the presentation, great brands. We're well positioned. And so business is looking quite healthy. We don't believe there's any gremlins in the closet. So it's well positioned. We do need to continue to diversify. We do need to deliver against a couple things we've been talking a lot of both, which is M&A. However, again, most of you are saying to me and Paul and the team and David and Brett, "Thank god. You haven't run out and bought a bunch of stuff and put a lot of debt," and really, really, really well positioned. And I've got to say the e-mails and phone calls are starting to come in pretty heavily with regard to that M&A space. So you can see that last page for yourself. It's consistent. The brands are well. They're strong. Dr. LeWinn's is good domestically. And obviously, export with a great partner like ABM. And Aware has been crucial to delivering to ABM. And they're actually, and A'kin as well, coming forward with investments in the agenda, the innovation agenda, with regards to like taking a couple people in R&D a few years ago. Now it's like 13. And Donna and David have got much more capable people in innovation in their teams. So we're investing in the future. Again, M&A, as mentioned, that's obviously crucial. The only tweak to the M&A strategy is really focus on sustainability and just kind of keep an eye on the relevance of grocery. Grocery has really popped up to be a more relevant channel through COVID-19. So that's important in how we think about things, and we pivot and tweak our approach. Again, that's supported by a really healthy balance sheet and all the rest of it. Looking after our people. We've got 0 people with COVID-19 across 460 people across Hong Kong; Singapore; New Zealand; Australia, all states in Australia obviously. And we have very strong routines and considerations set as to how do we look after our people. And actually, if anything, we actually [ live ] closer to each other. And then last is we believe we're fit for the future, so bring it on. These new companies and targets and brands and capabilities come to us. We need to look at these with a view of the future short, mid and long term. We've got a very supportive Board and a great management team. So I'll -- I can wrap it up there with just one last comment just to ensure that we're all in the same page. Obviously, we have that plus 20% delivery on PBT over last year and growth, but we also had a significantly good July. And we're off to a cracking start in August. Again just sort of from a compliance perspective, we're sharing that with the broader team as to where we stand today. So let me leave it at that. And I would open it up to Q&A, so maybe I hand that over to the administrator.

[Operator Instructions] Your first question comes from Philip Pepe from Blue Oceans Equity (sic) [ Blue Ocean Equities ].

Well done on great results for FY '20, and it sounds like a strong start to FY '21. Look, you'll be bombarded with questions on Dr. LeWinn's, so I might just ask on Multix, if I can, strong growth due to good work and the current conditions. Have you had any range expansion or shelf space expansions in your distribution network? And can we expect some going forward?

Donna, do you want to take that one?

In terms of an innovation perspective, we're continuing to expand it from a sustainability perspective. So we have got new products that are coming in over the next few months, again expanding in segments [ in cleaning ], expanding on kitchen tidy. So -- and we are looking for the next level in terms of new materials that we can leverage to keep on fueling the sustainability. In terms of range and expansion, Lori, please, do you want to comment?

Yes, certainly. So from a range perspective, we did go through a rationalization in some of the domestic customers deliberately through range rationalization to deliver the great profitability in the Multix brand. In New Zealand, we continued to see expansion of the Multix brand across all customers. I think there was over 3 new lines in Woolworths across the network and continued to 12 new lines in new channels in hardware in Mitre 10 in New Zealand. And we obviously also had over 42 lines loaded onto Catch, which is an online retailer, a year ago in the Multix brand. So whilst we're looking at range rationalization on one hand, we're also looking at increased distribution on the other in a number of customers.

And Phil, so you're quite close to the business. I mean it's one of those situations where we took a pretty sleepy old brand and we turned that around into sustainability in a greener range, but to be fair: Customers through private label and competitors are looking to kind of clip the end of our tail at the moment because they're all on that sustainability drive as well. So we just need to keep innovating on top of that because they are basically trying to move into the same areas that we've moved into in sustainability and greener. So you can see it literally on shelves. It's like -- it's just like, "Wow, let's just copy those." So we just need to keep driving that innovation, which we're on to and all over, but we're definitely getting challenged in that area.

Your next question comes from Ian Munro from Ord Minnett.

It's actually Josh Goodwill here, just dialed in for Ian. So I'll start with ABM, and the momentum that ABM has achieved in China is really good. I just wanted to get your perspective on how far along the Dr. LeWinn's brand is in its life cycle in the China territories and what the execution risks in China are going forward.

Yes, I think that's a great question. So as far as the life cycle goes, when Livia -- I had a good, long session with Livia yesterday. She feels it's just in its infancy, so we've got a lot of upside, as far as volume, scale, profit and innovation in particular. And she looks at it probably around -- in a scale of 1 to 10, around 1. So lots of opportunity. That's the first piece. On the business model, I think the fact that we are in a formalized joint venture with a Chinese company that we're very close to and have known each other -- some of the senior principals like myself; and Livia, who's the global head of the company; and myself, CEO of McPherson's, have known each other for 7 or 8 years now. And we're feeling very good about the fact that we've got a formal joint venture. I would hate to be an Australian company just going through Australian distributors, as opposed to going through a legal formal entity that goes through a bonded warehouse and free trade zone, all tax and duties being paid, and then full transparency as to how that works. So I think we are in a really, really strong position. Now I'm actually a bit worried, watching the news over the past few days in particular, for other companies that are just dealing through local distributors.

Sure. And maybe if I can just ask in terms of the ABM [ 66 ] festival and the other sales events. I'm just interested in what the contribution to overall sales these kinds of events had and as a proportion.

I might hand over to David or Paul on this, but it's really lumpy. Like those big events are massive, right? But David…

Yes. So these are in 5 and 6 [indiscernible] say [ 66 ] is one that we -- ABM stretched it into a festival from the 6th of June to the 18th of June. They then come back for presale Singles' Day 11/11, and then they have 12/12. So there's 5 or 6 throughout the year. And certainly they account for the majority, but what ABM are attempting to do: So take the period of August. They are looking at building their own proprietary promotional event periods as well. So -- and this is then to make sure that they don't end up through that sort of trough-and-hill sort of cycle that you go through in the China market versus that traditional offtake of an Australian-type market. So it's still the majority. There's no doubt, but I think what I would say is that ABM are actually looking at ways to flatten that curve.

Okay. That's helpful and sounds pretty exciting. Can I also just ask one more just in terms of looking forward into the December quarter outside of the ABM partnership? How should we think about the strength of your category demand in the grocery and pharmacy channels, respectively, maybe relative to where the market was 12 months ago?

Well, we are obviously #1 and -- about 5 or 6 -- so it will be 6 top brands that we look at. And we're #1 in all -- in 5 of those 6, so we're very well positioned, with very strong relationships, with very good innovation. So I think we are -- and hence why so many people are now knocking on our door, because so many of them are struggling. So -- and so we're very well positioned. The one we need to fix is A'kin, right? So then -- it's not #1. So we need to fix that, and that's what we're planning to do. And for everyone just on the call. We are very accessible as a management team. We've got an outrageous agenda going over the next [ cap ] 2 or 3 weeks between Sydney and Melbourne; and now getting some quite interesting overseas interest, which is interesting, [ from a ] register perspective. So but -- and I think you guys know we're very accessible. So if you want to catch up on a subject or a query or an opportunity or an M&A opportunity you want to share with us, please share that, and we'll respond quickly.

[Operator Instructions] Your next question comes from Elijah Mayr from CLSA.

Congratulations [ on the good results again ]. Just first one, I just wanted to ask on Dr. LeWinn's and just sort of in relation to ABM. I'm not too sure how much detail you get from them, but just in terms of that growth internationally, how much of that is driven, I guess, by new members into the ABM network? And how much is by sort of existing members? Those have obviously gone, I think, from around 1 million last year to around 5 million this year. And just wanted to know if you have sort of information on that spread or that concentration of sales through that network.

Well, that's a really, really good question, and that's something that collectively with ABM we're working on. So Liv has now got like 100-plus people in her team. And her goal is to be able to get really, really rich insights on business intelligence and consumer insights. i.e., she wants to understand who's buying it, where they're buying it, what region; males, females; cohorts; and 20s, 30s, 40s, 50s, what age are they; every kind of. So she's putting all that together and probably a bit frustrated that she's got -- she's building the capability. We just don't have that access at the moment, but it's coming. So alas, sorry. We probably don't have what we want at the moment and on that collectively, but it's the guys are doing an enormous amount of work to work through that.

No worries. Understand. I guess the…

So that -- what we don't understand is like how much of it -- I think what you're asking is so how much of it is from a step change in ABMers versus -- that are just continuing to buy versus new users or people that are kind of [ aren't selling ]. So that's the bit we don't really comprehend yet, but I really believe clearly that we'll get there because ABM is a very sophisticated operation and they will get all this stuff.

It would be great to understand, I guess, that as that -- the members increase, how that distribution across China sort of progresses as well. I must follow up with then just with Dr. LeWinn's domestically, just backtracking from the numbers from the presentation. It looks like domestically the second half was slightly lower than the first half for the first time. I was just wondering if you could give us maybe a sense of seasonality and how you're sort of seeing growth going forward for the Dr. LeWinn's business domestically.

Lori, do you want to [ comment that ]?

Yes, absolutely. So you're 100% right. Obviously, COVID did impact facial skin care as a category. So we did see some softening from about March onwards, but what we're seeing now is a recovery of that now. I think you would have heard in the data that -- the outperformance of in particular Dr. LeWinn's domestically in market. So Dr. LeWinn's grew at -- on an MAT basis over 20% from a scan perspective, but that did soften obviously with the exit of some suitcase trade in Australia during COVID and the COVID pandemic itself. So what we can expect to see is the recovery of that. And obviously we've reshaped our plans moving forward to trying and restimulate that growth. And obviously I've spoken about the share of shelf increases in both Priceline and Chemist Warehouse, which will give us greater presence in store domestically.

I think the other thing, Lori, is that [indiscernible] [ COVID period ], a lot of our customers actually reduced promotional activity. And that reduction in promotional activity on the total categories is having impact on everyone.

Understand. And how are you seeing that rebound, I guess, focused more on sort of ex Victoria, in terms of as those restrictions roll off? Have you seen sort of momentum build back into that category [ in particular there ]?

We have an -- interestingly, there's been a huge increase in the online both from our domestic customers and obviously the online retailers as well. So there has been a shift from bricks and mortar to online, but -- so what we've done is actually reshaped our plans to facilitate online presence as well. So there has been a shift from a how a customer is buying, but we are seeing still activations in store are still really working strongly for both Priceline and Chemist Warehouse.

Understand. And I might just squeeze in one more, if I could, just on A'kin. It seems like that the existing channels sort of got hit a bit hard in second half, but I was wondering if you could sort of give, I guess, how you're looking at those channels going forward. And then maybe a little bit more detail on the opportunity in Woolworths in terms of if it's going in each of the stores. It seems like that could be a quite sizable opportunity for you guys.

I think what A'kin [ is going in to breeze ] -- so we're going to be very, very careful and all trying to look at a price pack correlation between pharmacy and grocery. Because if you don't get that right, you end up upselling people. And given my background and David's background in Coca-Cola, we would always have an offering at a certain price point for Kohl's and one for Woolies. And this is more -- really more around pharmacy and grocery, making sure you differentiate your offerings. So we've been very cautious about that, but what going into Woolies offers us is an opportunity to build scale and the brand. And what will come with scale is better cost of goods. What will come with better cost of goods is a better price point. So that's good for everyone. It's more -- it makes us more affordable.

Your next question comes from Sarah Mann from Moelis.

Laurie, you kind of alluded to it before in terms of, I guess, the changing importance of the grocery channel, so just kind of interested what kind of trends you've seen post COVID in terms of, I guess, grocery starting to get a bit more market share with skin care, for example; and then also just interested in kind of how you've positioned your business for that channel shift.

Yes. I think it's probably been the most -- if you look at -- or I think it's my session [indiscernible] I talk about our top 10 strategies. The only thing I'll re-mention there is really the kind of tweak on the strategy is probably to have more of a sustainability play and how we look at things. I feel that things such as immunity and cleansing and all those things are really front of mind. And then that kind of just plays into the sheer bulk of traffic [ that grocery plays ]. So I think we've probably seen -- I think we'll probably see from us is, firstly, a little more pivot to ensuring that we have a bigger grocery portfolio moving forward and whereas I was a little bit in the past fixated with pharmacy margins. But what we see here is there's a scale game going on here and there's a sustainability game going on here. And there is a health and wellness game going on here in grocery that we're really well positioned to be part of. Does that make sense, Sarah?

Yes, yes. No, that's excellent. And so then in terms of just picking up on a question before about A'kin. I mean, does that mean you're maybe going to have a bit more of a, I guess, health skew in terms of sanitation products rather than, I guess, skin care when you go into Woolworths? Is that kind of the strategy? Or can you help me understand, is it just pack sizes and different price points? I'm just trying to understand between the 2 channels…

So yes, yes, but I need to be careful from that [ slightly ] disclosure perspective because we haven't notified the market as to what ranges and SKUs we're going in with. But yes, as you can imagine, we're trying to align ourselves to the current trends. Is that -- Paul usually keeps me in gear here. Is that fair to say, Paul, we just sort of align ourselves with the trends and…

Yes, yes, [ as far as this ].

Okay, great. And then just the other question, I guess, to flow on from COVID. Obviously, people are kind of -- everyone is kind concerned about freight getting tougher. And some of your inventory, clearly, you still ship from overseas. Just interested in kind of have you changed how you think about kind of sourcing inventory and raw materials kind of going forward.

Yes. That's been -- so we've got this. I think we mentioned to you we've got this rapid response team and we've got this think beyond team with regards to COVID-19. And that's really all about how we pivot and get smart on our [ portfolio ingredients ], our packaging, our inventories or componentries, et cetera. So one example is we've just now opened up a brand-new supplier in [ Vietnam we didn't have before ] because they can get stuff to us quicker and where we're paying a fair bit of airfreight on stuff, especially around Multix. And I'm okay with that because I'd rather keep our customer and consumer happy than run out of stock. So doing a bit of airfreight, raising a couple points of margin. I'm actually okay with that, as long as we keep continuity of our product and we don't get delisted. So moving piece on the top 150 SKUs. We have a meeting every week to review those top 150 SKUs from a supply chain perspective. And I must say I'm very proud of how the guys are operating. It's working very, very well.

Great. And then sorry. Just last one from me. On the M&A front, just interested, I guess, more broadly on the comment where you've said it's going to be a more attractive market from an acquirer perspective. If you could just give any more color there in terms of like just the big picture acquisition opportunity and landscape.

[indiscernible] actually, Sarah. Put it this way: We've never had more -- so -- but what we were doing is we were chasing things down because we have such a great balance sheet. And a lot of people don't really know who we are and what we do. And we're in health and wellness and beauty. And so we were really on the hunt. Now people are really coming to us because we have only, one, buildout; two, some capital. Or three, they see the synergies and understand us now that we're starting to get a little bit of the share of voice in the marketplace. So yes. So that's really what's happening in sort of Board meeting yesterday. And we probably spend 80% of the Board meeting on M&A stuff. So it's really looking really positive for us, but we have some investors get frustrated with us because we haven't cracked it. And 99% of our larger investors are really happy that we haven't got something done. So we've just got to keep that capacity and keep that balance sheet healthy to do the right deal. And we've got strong criteria and we're very disciplined and over-boring some people on it, but we're going to do a deal at some point which will be a good deal, hopefully.

Your next question comes from Jonathon Higgins from Shaw.

Good set of results. Just 2 from me. Just one -- and sorry to keep banging on about this. This is obviously the particular brand, but Dr. LeWinn's, is there a specific category that you're looking -- look at within that China market? And I assume you're growing significantly fast than how fast that market is growing on an annualized basis. If that's the case, who do you think you're actually taking? What sort of brands are you competing with or taking market share from in consumer's mind?

I might ask David to help me with this one because that gets back to I think [ there's lay ahead ] the same kind of question on where it's going and who it's gaining and start to work out the consumer set and the competitive set. I don't think export-wise we have the right answers to that yet…

Yes. So Jon, we haven't done like a gains-loss analysis where you go right here, sort of switching, and it goes from brand to brand, but I guess some commentary is observations are ABM want to take Dr. LeWinn's to be a top 10 global brand and starting in China. So I guess, if you start to think that way, then you're going to be playing with the big guys in terms of Procter and L'oréals, bigger brands, some of the big French brands as well. So for us, that's pretty exciting because that sort of moves the bar really, really high. The second piece we've noticed when we've done a little bit of research in the market is, unlike some Western markets where you may buy into the full regime, they really pick and choose it. So it's sort of saying, right, you might have an eye serum that's taking share from another player that does eye serum, but we may not be as strong with that individual in night cream, for example. So it's they may -- the topics change in terms of what they want to use for different things. So that's the work that we've got to do. I think Laurie talked about it before, which is obviously with ABM we want to get more sophisticated about the insights we generate, not just on their platform but on their users, to understand over time how their overall portfolio of products being used is going to change based on what they're providing on their platforms. So that's still some of the work to be done.

Just second question, just on that international channel and into China. Like it's obviously it's still early days, huge market, big opportunity. That channel is doing really well for you with ABM and going through the correct sort of ways that you've got there. You've now got the JV partnership and the like. Is there other -- what's the sort of next international part of that channel? Like is there an adjacent country that's the next thing that you're looking at that goes alongside that? Or is it an off-line channel as well?

[ Absolutely. I mean ] I was actually planning to, with Livia, go to Canada and potentially Germany like literally weeks before COVID-19 hit. And there's 2 million Daigous in Canada, for example. So this is primarily families that have integrated from China, mainland China, to Canada. Usually the husbands -- I mean this respectfully, [ so it's not as normally ]. Usually the husbands work and have a level of English or language capabilities, and unfortunately, a lot of their partners, wives and others are home, bored and looking to treat. And so they get into this kind of whole [ Daigou ] thing. So Liv was really keen for us to go across and present and sign them up. And similar situation in Germany, and so yes, there's lots of opportunity to continue to do things. And ABM is really focused on a more global approach now, so I think it's just a watch and see, as far as that goes. And we will hold hands and support ABM as much as we can because they're just such a great partner.

So if they -- if you decided you wanted to go into an off-line channel in a decent way in China with this JV structure, how would you look at doing that? And do they have any existing -- just second point to that, do they have any sort of existing large off-line relationships?

Absolutely. And that's why, when someone asks the question where we're at this stage of relationship between ABM and ourselves, I would say, between 1 and 10, we're probably at 1. That's because Liv wants to open up all those channels in the right way with the right partners. I don't know, David, if you want to add to that.

Yes. Look, I think they've certainly been experimenting with these online to offline. You're aware that we don't -- we're not registered a full offline in China at the moment, and obviously part of that has got to do with animal testing. We've heard recently that, that process is undergoing some changes. They're reviewing the whole nature of some of the classification and [ registry ] related to beauty and cosmetics within China itself. And so we're watching that space very keenly at the moment to understand that, which would then allow for the brand to move through that registration process for an off-line environment, but I think Laurie said it, which is Canada, the United States, New Zealand, Singapore, the U.K. and Germany, in certain markets that they're targeting large expat Chinese populations to work and basically become ABM is -- because I think the big thing is it's not just for their own individual purchases. As you'll remember, this is a 2-level network selling program. They've got huge communities back in mainland China that they can connect to. So that's part of their growth piece, geographic as well as on- and off-line.

Thank you. There are no further questions at this time. I would now like to hand the conference back to Mr. McAllister for closing remarks.

Okay. So thank you very much, everyone, for your time and interest and engagement. And I look forward to kind of probably talking to just all of you over the next couple of weeks. We've got a schedule for a [ Zoom, zooming ] from almost 7:30 in the morning to a similar time period in the evening. So -- but as you know, we're very accessible, so please reach out to us on e-mail or mobile should you have any questions. And thank you again for your interest and support, okay?

Thank you.

That does conclude our conference for today. Thank you for participating. You may now disconnect.