Comvita sales looking sweet

Comvita bosses say first half-year results, including a 14 per cent rise in sales to $41.8 million, fits with calls for shareholders to resist a takeover bid by Cerebos.

The Paengaroa natural health and beauty products company announced a normalised, net after-tax profit of $2.6 million for the six months to September - well up on the $392,000 recorded during the same period last year.

Sales rose 14 per cent to $41.8 million, up from the $41 million guidance figure put forward in September. An interim payment of 4c a share, payable on December 16, was also announced.

Chairman Neil Craig said the results were confirmation Comvita's investment in recent years was starting to deliver for shareholders.

"This is a strong result. Positive trading activity in all key markets, combined with on-going operational improvements, has delivered sales and earnings significantly better than the previous two years."

Craig described the result as "very pleasing" said this fitted well with advice issued to shareholders asking them to resist selling at $2.50 a share until the target company statement was sent out, which is expected on Tuesday.

When asked if Cerebos was likely to increase its offer in light of the results, Craig said that was "their call", but the results reinforced his earlier comments that the offer under-valued Comvita by a considerable margin. "I believe this will be borne out in the independent adviser's report and the target company statement. I am sure they will take great interest in this."

Chief executive Brett Hewlett said the unadjusted net profit, after tax, rose from a loss of $2.2 million in the first half of the last financial year to a $2.2 million profit in the six months to September as a result of investment in infrastructure in the past five years.

"We have strengthened our distribution networks in international markets, particularly Australia and Asia. We have also invested heavily in research and development, new product development and the Comvita supply chain - particularly in the sourcing of manuka honey."

The infrastructure changes include a new cost structure and business model, plus taking control of distribution lines in Australia, mainland China, Hong Kong, Taiwan and Korea.

"We now have quite an extensive distribution network in Asia and we control the brand and the image."

Hewlett said the cost structure and business model were enabling earnings to grow ahead of the expected top-line sales growth.

"The positive results of this investment are evident in the 18 per cent rise in gross profit for this six month period to $23.5 million from $20.0 million and a 5 per cent rise in operating expenses to $19.9 million from $19.0 million."

He also talked about increased ownership of beehives, including the purchase of Waikato Honey Products this month, and work with land owners to secure supplies for its manuka honey products.

Second half-year results are, historically, significantly stronger than the first-half results and Hewlett said Comvita was on track to continue this in 2011/2012 and meet its full-year forecast of sales of between $91 million and $95 million and normalised profit of between $7.3 million and $8.2 million.