Vitaco climbs 19% in ASX debut

Food supplements company Vitaco Health Group debuted on the ASX with the shares climbing 19%.

The company was  formed through the merger of Healtheries New Zealand and Nutra-Life & Fitness and had almost a decade under private equity ownership, 

The stock opened at $A2.50, a premium to the $A2.10 price the shares were sold at in an initial public offering that raised $A231.6 million. They recently traded at $A2.42. Chief executive Ryan d'Almeida says it is a "tremendous start" as a publicly listed company.

Australian private equity firm Next Capital built up the food supplements firm in 2007 after buying Healtheries and Nutra-Life, and lodged a prospectus to list on the ASX last month. The funds raised went to repaying debt and giving the existing shareholders an exit opportunity. 

The company now consists of the vitamins and supplements divisions, whose brands include Healtheries, Wagner and Nutra-Life, and the sports and active nutrition and health food segment, made up of Musashi, Balance, Bodytrim, Healtheries and Abundant Earth brands.

Vitaco derives about 38% of annual revenue from its New Zealand business, and manufactures most of its products at two facilities in Auckland.

"New Zealand is the foundation of our business – it represents 40% of revenue and it's the place where we do most of our manufacturing – it's absolutely central to the business model," Mr d'Almeida said.

Vitaco has spare capacity at its manufacturing sites, and Mr d'Almeida says the company wants to increase production at the facilities.

The perceived quality of New Zealand and Australia was a selling point as it enters international markets, including China, the UK, and South America. The fact we also manufacture our own products is a point of difference, Mr D'Almeida says. "They like products made in Australia and New Zealand."

Vitaco is bedding in its most recent acquisition –  the Musashi brand – which Mr d'Almeida expects will be fully integrated before Christmas. The company and will look at potential acquisitions in Australia and New Zealand, with the market still "relatively fragmented."

The company anticipates annual revenue will rise to $A211.3 million in the year ending June 30, 2016, from $A172.4 million a year earlier, generating a net profit of $A15.4 million, up from $A11.1 million in 2015.

Vitaco is expected to pay a dividend of between 50-60% of pro-forma net profit from 2016.

(BusinessDesk)