Vitaco downplays loss of Trilogy agency contract

Vitaco Holdings is downplaying the loss of an agency contract with New Zealand skincare maker Trilogy International [NZX:TIL], saying it frees up the ASX-listed food supplements company to focus on higher-margin business.

Vitaco, which was formed through the merger of Healtheries New Zealand and Nutra-Life & Fitness, says its agency manufacturing and distribution agreement with Trilogy will end on June 30, reducing annual earnings before interest, tax, depreciation and amortisation in the 2017 year by between $1.4 million and $1.7 million. It also has an agency contract with Comvita.

"This provides an opportunity for Vitaco to develop natural skincare products within its branded portfolio and to transition from lower agency margins to higher branded margins in this category," the company says.

The company’s agency work was at a margin between 10-15%, and it says it will be able to chase higher margins in line with the rest of its portfolio.

Trilogy last year bought New Zealand's largest independent importer and distributor of fragrances, cosmetics and toiletries, CS Company.

Vitaco manufactures most of its products in New Zealand, and when it listed in September last year, chief executive Ryan d'Almeida said he wanted to fill the spare capacity at its two Auckland facilities.

Australian private equity firm Next Capital built up the food supplements firm in 2007 after buying Healtheries and Nutra-Life, taking it public last year. 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.

It today reported a net loss of $A15.4 million in the six months ended December due to a series of one-off costs totalling $A23.2 million associated with listing and integrating the Musashi business.

On a pro-forma basis, earnings before interest, tax, depreciation and amortisation rose 11% to $10.4 million on a 38% gain in revenue to $A110.5 million, and Vitaco says it's on track to meet its offer document guidance for annual earnings of $A23.7 million.

The board declared an interim dividend of 1.69Ac per share, payable on March 31 with a March 4 record date.

The ASX-listed shares fell 4% to $A2.18, and have dropped 14% so far this year.

(BusinessDesk)