Back in March, Marcus Blackmore, chairman of Blackmores, wrote to his board to tell them he had sold 150,000 company shares to reduce his personal debt and planned to buy a yacht.
That was on March 17 when shares in his health and vitamins company were about $48 each. Today shares were over $70 a piece – a growth rate which makes for a chart shareholders would be grinning about.
Blackmore probably could’ve bought a bigger boat if he’d held off selling those shares.
“If I’d known I would’ve sold my house and bought shares,” Blackmore told Business Insider.
“I was talking to my staff the other day, because it’d be interesting to look at the minutes from our strategy session that we had 14 months ago because we didn’t predict the sort of growth that’s happening in the business at the moment.
Blackmore said he’d been hanging around the doors of the company for about 50 years now and had “not seen growth like this. We’re struggling to make the product.”
In the nine months to March 31, Blackmores’ invoiced sales were up 28% to $326 million with its Australian market up 35% and Asia up 18%. Its nine-month NPAT at $31 million was up 76% and up 22% from full year 2014.
But upping supply isn’t as easy as boosting production, Blackmore said.
“We’re regulated with drug regulation; you can’t just turn the tap on a bit harder and if it gets to herbal medicine you might have to grow the herbs. It’s not that easy to just ramp up production as much as we’d like to,” he said.
Over the past four years, Blackmore said heavy discounting in pharmacy with entrants like Chemist Warehouse in the market has meant profitability was on “some what of a hiatus”, but Blackmore said the industry had gone through a level of “rationalisation” and it was back in a big way.
“We’ve had to take all of this on board and to a large extent transform the business,” he said. “We were actually selling quite a lot more tablets and capsules, we just weren’t getting paid as much and so our profitability was under pressure.”
Blackmore went on a mission to rip costs out of the business and made a bunch of management changes, including appointing David Fenlon as managing director, Australia & NZ.
“We’re far more capable as a business in dealing with those sort of outside stresses that you get with discounting and so on,” Blackmore said.
“Some of those changes were made a couple of years ago and we’re now starting to see the benefit of that.
“When you’ve got a bigger, more successful business, you can afford to employ bigger and better people.”
Blackmores is a bit of an unsung Aussie company. It’s been pushing into Asia for almost three decades now and last financial year, with the exception of its Thailand operations, performance has been strong.
“I think the quality of the management in our Asian businesses has improved dramatically,” Blackmore said, adding Chinese demand after the implementation of the Free Trade Agreement has gone nuts.
Blackmore said just the other day he was walking though the warehouse and there were 120,000 tubes of vitamin E cream on pallets ready to be sent to China — and all the product had been pre-sold. The company has also recently signed former pro tennis player Li Na to boost the company’s profile in China.
Another element which Blackmore thinks is driving growth is the general acceptance by the wider community of natural health and a trend towards wellbeing.
“We’re seeing a greater understanding, a greater acceptance by the medical profession particularly, in the role of nutritional medicine in the prevention and the treatment of disease,” he said.
“I think we’ve got an underlying current within the community of a better understanding of these vitamins and herbs and what they can and can’t do and that’s good for our business.”
As for the boat, it’s still under construction in South Africa, where the hull and deck have been moulded. Blackmore said the letter to the ASX was an example of both bragging and good disclosure and the yacht wasn’t due to be launched until April next year.