Financial and Investor News
|H&H Group posts Interim Results 2024
Media Release – 2024 Interim Results
27 August 2024
H&H Group progresses towards full year goals, despite low single-digit overall revenue decline in H1 2024
- High-margin and fast-growing nutritional supplements[^1] across all three strategic business pillars driving healthy growth levels and market share gains, making up 66.1% of total Group revenue
- Adult Nutrition and Care (ANC) segment achieved 11.2% revenue growth led by strength of core markets; mainland China and Australia & New Zealand (ANZ), as Swisse reaffirmed its leading market positions
- Baby Nutrition and Care (BNC) segment confined to 22.0% decline due to systemic challenges across the infant milk formula (IMF) industry in mainland China, despite the Group's IMF market share expanding
- Pet Nutrition and Care (PNC) segment saw steady growth 4.1% led by a robust performance from Zesty Paws in its home market of North America
- Diversified sources of funding and optimising capital structure, while bolstering inventory management to improve working capital
- Progressed with sustainability initiatives, achieving recognition for employee wellbeing and community impact
Leading global family nutrition company, 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 2024, delivering single-digit revenue decline (-4.1%) notwithstanding robust performances across the Group's Adult Nutrition and Care (ANC) and Pet Nutrition and Care (PNC) segments.
Akash Bedi, Group CEO and CEO for North America, Europe, Middle East and India at H&H Group, says although the Group had a challenging first half of the year, total revenue contribution from nutritional supplements increased, and H&H expanded its market share in core markets.
"The Group navigated difficulties in the first half of 2024, predominately due to industry-wide issues across mainland China's IMF industry resulting in low sales in our BNC segment. Additionally, one-off restructuring costs to premiumise Solid Gold's product portfolio and optimisation of our channel strategy in North America and mainland China, along with increased finance costs, contributed to a decline in net profit. Nevertheless, we delivered a consistent level of profitability across all business segments, with fast-growing and high-margin nutritional supplements continuing to be a key growth driver. I'm also pleased that we maintained healthy growth in core markets such as mainland China and Australia & New Zealand for our ANC segment led by Swisse, and North America for our PNC segment led by Zesty Paws. Even though our IMF business in mainland China struggled during the first half of the year, we maintained healthy profitability and market share in the super-premium IMF category, with Biostime ranking no.3 in the market[^2] with a market share of 13.0%."
"Furthermore, I'm proud of the advancements we've made in our sustainability agenda, specifically in the wellbeing of our team members and in making a positive impact on our communities. In Australia, we maintained our Great Place to Work certification for the fourth consecutive year, while H&H Singapore earned recognition as a Company of Good – 1 Heart for its significant societal and environmental contributions. These accomplishments reinforce our commitment to fostering an inclusive, supportive workplace culture and driving positive societal change."
The Group improved its working capital by decreasing its inventory turnover, supporting a strong operating cash flow conversion at 107.4% of adjusted EBITDA. Additionally, the Group declared an interim dividend of HKD0.30 per ordinary share, consistent with previous years.
Mr Bedi adds, "Our ability to sustain growth and profitability, strengthen our capital structure, and deliver consistent shareholder returns, while positively impacting people and the environment, is essential to our business success. These factors are crucial as we continue our journey to becoming a global leader in premium family nutrition and wellness, offering superior products and aspirational brands."
Regional highlights
Mainland China continues to be the largest contributor to the Group's revenue at 67.9%, despite a 10.5% year-on-year decline on a like-for-like basis due to the weakening IMF segment. This was partially offset by strong growth momentum from the ANC segment (8.8% revenue growth) with Swisse achieving double-digit growth, fortifying its no.1 position in the online VHMS market[^3]. This was bolstered by strong sales in the cross-border e-commerce channel (12.2% growth), and across normal trade (in spite of a small single digit overall decline) with Swisse ranking no.3 with a market share of 2.8%[^4]. Notably, Swisse Plus+ made a significant contribution to overall ANC revenue seeing 48.7% growth, leading in the anti-aging category, and with Swisse Liver Cleanse guarding its leading position in the high-end thistle segment[^5] in the mainland China e-commerce market.
Mr Bedi comments, "I'm very encouraged by the performance of the ANC segment in mainland China, particularly Swisse Plus+ with its higher profitability accounting for double-digit percentage of total revenue. We also reaffirmed our no.1 spot across beauty, immunity, women health, men health, detox, multivitamin, heart health in VHMS market on CBEC platforms. These successes were driven by our diversified product mix to better capture demand for premium nutritional products from different consumer audiences with ranges such as Swisse Me and Little Swisse. This was in addition to successful product launches in innovative categories alongside our strategic PPAE model (premium, proven, aspirational and engaging). Most encouragingly, our efforts have elevated our position in mainland China's overall VHMS market to no.2[^6]."
The Group's BNC segment in mainland China faced significant challenges and sustained headwinds to perform lower-than-expected. Whilst overall IMF revenue declined by 19.0%, H&H gained market share from 11.7% to 13.0% to achieve no.3 position in the super-premium IMF segment. Sales of paediatric probiotic and nutritional supplements declined by 32.0% due to a high base effect, however paediatric nutritional supplements revenue grew 113.0% and sustained its no.1 position[^7], driven by increasing demand for innovative products such as calcium, DHA and Gummies.
"Our IMF business has been particularly struggling due to industry-wide issues in clearing 'old GB approved' stock, resulting in increased competitive intensity and discounting. Despite this, our sales decline has narrowed quarter-by-quarter and we are focused on delivering our strategy to expand our market share," adds Mr Bedi.
Sales in the PNC segment in mainland China declined by 14.8% as the Group focused on premiumising the Solid Gold brand through channel optimisation and reallocating resources into categories with higher margins to improve profitability. Solid Gold maintained its no.2 position in mainland China's online premium cat dry food category[^8], with distribution reaching over 10,000 pet stores and pet hospitals in the offline Chinese market.
In Australia and New Zealand (ANZ), revenue grew 16.9% on a like-for-like basis as Swisse maintained its no.1 position in the overall Australia VMHS market[^9] and was voted the Most Trusted Vitamin Brand for 2024 at the Reader's Digest Trusted Brands Australia Awards. The brand also increased its market share from 11.7% to 12.2%, in addition to maintaining its no.1 position across the multivitamins, detox, beauty from within, muscle support and recovery categories[^10]. This success was due to the strong growth of the Group's corporate daigou business, continued premiumisation efforts and an innovative product portfolio, including the Swisse Gummies range which continues to hold no.2 position with a market share of 15.6%[^11].
Mr Bedi notes, "ANZ is our second largest market by revenue and has seen an exceptional first half of 2024, driven by its strategic focus on the domestic channel through innovative product strategies and marketing campaigns. We are very proud to have been recognised as the Most Trusted Vitamin Brand 2024, underscoring Swisse's unwavering commitment to quality, innovation, building and maintaining consumer trust."
The Group continued to rapidly develop its PNC business in North America, H&H's third largest market. Both brands, Zesty Paws and Solid Gold, have capitalised on the well-established trends of premium pet nutrition and pet humanisation, along with the growing pet population. Zesty Paws expanded its offline distribution, launching into Sam's Club, Costco, Petco and Meijer, and building on its earlier expansions into Walmart, Target, PetSmart, CVS and Tractor Supply, as well as seeing continued growth on Amazon. While these earlier expansions created a high-base effect for this year, which pushed down the brand's top-line growth rate into the low double-digits, Zesty Paws' broad consumer base and stable market share will continue to drive its future profitable growth. Meanwhile, sales of Solid Gold in North America increased slightly amid ongoing channel optimisation and portfolio premiumisation efforts aimed at driving the long-term growth of the brand.
"Zesty Paws is now one of the most recognised pet supplements brands in the US. With our launch into key retailers such as Sam's Club and Petco this year, we are one of a few pet supplement brands present in all key retail formats. As of 30 June 2024, Zesty Paws and Solid Gold were present in more than 18,000 stores and 4,800 stores, respectively, across the US," says Mr Bedi.
In other territories, Hong Kong SAR and Italy are the Group's most profitable expansion markets led by the success of Swisse which is no.2 in Italy's beauty VHMS market[^12]. Meanwhile, newer expansion markets such as Thailand, India and the Middle East are growing steadily, with Swisse maintaining no.1 in Singapore's beauty VHMS, liver health and men's health markets[^13]. For the BNC segment, the Group focused on expanding its international presence by building recognition and trust around its innovative and more specialised IMF products. Biostime retained its no. 1 positions in the organic IMF and the goat milk IMF categories in the French pharmacy channel[^14].
Full year outlook
For the second half of 2024, high-margin and fast-growing nutritional supplements will remain a core focus and key growth driver across all regions, as the Group continues to drive stable top-line growth and profitability across each of its business segments.
Mr Bedi concludes, "As we look ahead to the remainder of 2024, our focus on nutritional supplements will drive similar double-digit growth levels in our ANC business, especially in mainland China and Asian markets, as growth in the ANZ market normalises. While for our BNC business, we expect nutritional supplements and a weakening base effect to help our paediatric probiotic and nutritional supplements return to growth – helping to offset the weak performance of our IMF business. We anticipate a further sales decline in the second half of the year amidst high industry inventory levels and aggressive discounting."
The Group's PNC business will focus on leveraging Zesty Paws' market position in North America, while continuing to pursue expansion opportunities in the UK, Europe and Asia. Meanwhile, the short-term performance of Solid Gold will continue to be impacted by the optimisation of its product portfolio and channel in North America and mainland China, with the restructuring of the business expected to be completed in 2024.
In addition to these operational trends, the Group successfully completed its major refinancing exercises planned for 2024. H&H expects to see a gradual deleveraging trend in its net leverage ratio to the end of the year. With its high cash generating business model, the Group is confident about its ability to further improve its balance sheet over the next two years.
FINANCIAL RESULTS
Six months ended 30 June (RMB million, Unaudited)
| 2024 | 2023 | Change | |
|---|---|---|---|
| Revenue | 6,692.1 | 6,980.8 | -4.1% |
| Gross profit | 4,072.3 | 4,262.4 | -4.5% |
| EBITDA[^15] | 1,098.4 | 1,397.9 | -21.4% |
| Adjusted EBITDA[^15] | 1,139.8 | 1,309.5 | -13.0% |
| Adjusted EBITDA margin | 17.0% | 18.8% | -1.8pts |
| Net profit | 305.8 | 608.0 | -49.7% |
| Adjusted Net profit[^16] | 347.2 | 513.4 | -32.4% |
| Adjusted net profit margin | 5.2% | 7.4% | -2.2pts |
Six months ended 30 June (RMB million)
Revenue by product segment
| 2024 | 2023 | Reported Change | LFL Change | % to revenue 2024 | % to revenue 2023 | |
|---|---|---|---|---|---|---|
| Nutritional Supplements | 4,425.2 | 4,192.3 | 5.6% | 5.0% | 66.1% | 60.1% |
| - VHMS products | 3,258.2 | 2,876.7 | 13.3% | 13.0% | 48.7% | 41.2% |
| - Paediatric probiotic and nutritional supplements | 508.6 | 743.6 | -31.6% | -31.6% | 7.6% | 10.7% |
| - Pet supplements | 658.4 | 572.0 | 15.1% | 12.3% | 9.8% | 8.2% |
| Infant formulas | 1,798.4 | 2,213.7 | -18.8% | -18.8% | 26.9% | 31.7% |
| Others[^17] | 468.5 | 574.8 | -18.5% | -19.2% | 7.0% | 8.2% |
Revenue by business segment
| 2024 | 2023 | Reported Change | LFL Change | % to revenue 2024 | % to revenue 2023 | |
|---|---|---|---|---|---|---|
| Adult nutrition and care products | 3,275.6 | 2,938.2 | 11.5% | 11.2% | 49.0% | 42.1% |
| Baby nutrition and care products | 2,431.5 | 3,115.9 | -22.0% | -22.0% | 36.3% | 44.6% |
| Pet nutrition and care products | 985.0 | 926.7 | 6.3% | 4.1% | 14.7% | 13.3% |
Revenue by geography
| 2024 | 2023 | Reported Change | LFL Change | % to revenue 2024 | % to revenue 2023 | |
|---|---|---|---|---|---|---|
| Mainland China | 4,541.4 | 5,076.1 | -10.5% | -10.5% | 67.9% | 72.7% |
| ANZ | 975.9 | 829.6 | 17.6% | 16.9% | 14.6% | 11.9% |
| North America | 815.8 | 736.5 | 10.8% | 8.1% | 12.2% | 10.6% |
| Other territories | 359.0 | 338.6 | 6.0% | 5.6% | 5.3% | 4.8% |
Total
| 2024 | 2023 | Reported Change | LFL Change | % to revenue 2024 | % to revenue 2023 | |
|---|---|---|---|---|---|---|
| Total | 6,692.1 | 6,980.8 | -4.1% | -4.5% | 100.0% | 100.0% |
-ENDS-
**For media inquiries, contact:**
H&H Group
Annabel Jenkins
+44 7514535600
annabel.jenkins@hh.global
Think Alliance Group
Matthew Schultz
+852 3481 1161
matt.schultz@think-alliance.com
[^1]: Nutritional supplements include Biostime probiotic supplements, Biostime paediatric products, Swisse vitamin, herbal and mineral supplement ("VHMS") products, and Solid Gold and Zesty Paws pet supplements.
[^2]: According to research statistics by Nielsen, an independent research company, market share data for the past twelve months ended 30 June 2024.
[^3]: According to research statistics by Early Data, an independent data provider, market share data for the past twelve months ended 30 June 2024.
[^4]: Based on sales data from Early Data, including Tmall and JD bulk trade.
[^5]: According to research statistics by Early Data, an independent research company, market share data for the past twelve months as of 30 June 2024 for single bottles with an average price of over RMB300.
[^6]: According to research statistics by Kantar Consumer Panel, an independent research company, market share data for the past twelve months ended 30 June 2024.
[^7]: According to research statistics by Kantar Consumer Panel, an independent research company, market share data for the past twelve months ended 30 June 2024.
[^8]: According to research statistics by SmartPath, an independent research company, market share data for the past twelve months ended 30 June 2024.
[^9]: Based on total market unit sales, according to research statistics by IQVIA, an independent research company, market share data for the past twelve months ended 30 June 2024.
[^10]: Sourced from IQVIA, market share data for last twelve months ended 30 June 2024.
[^11]: According to research statistics by IQVIA, an independent research company, market share data for the past twelve months ended 30 June 2024.
[^12]: According to research statistics by IMS IQVIA, an independent research company, market share data for the past twelve months ended 30 June 2024.
[^13]: According to research statistics by Nielsen, an independent research company, market share data for the past twelve months ended 30 June 2024.
[^14]: According to research statistics by GERS, an independent research company, market share data for the past twelve months ended 30 June 2024.
[^15]: EBITDA refers to earnings before interest, income tax expense, depreciation and amortization. Adjusted EBITDA = EBITDA - Non-cash gains of RMB5.5 million for the six months ended 30 June 2024 (six months ended 30 June 2023: gains of RMB88.4 million) + Non-recurring losses of RMB46.9 million for the six months ended 30 June 2024 (six months ended 30 June 2023: nil).
[^16]: Adjusted net profit = Net profit + EBITDA adjustment items of losses of RMB41.4 million for the six months ended 30 June 2024 (six months ended 30 June 2023: gains of RMB88.4 million) - Other non-cash gains of nil for the six months ended 30 June 2024 (six months ended 30 June 2023: gains of RMB6.2 million).
[^17]: Others include pet food from Solid Gold, baby food and snacks from Good Goût, baby accessories from Dodie and other skincare products.