Blackmores steadies the ship

Marcus Blackmore is an optimist who sees a lot of upside for Blackmores, Australia's largest vitamins company.

He's also a realist. Having just turned 75, he's positioning himself for a more genteel time, building a luxury home on a $10 million parcel of land at his beloved Bayview on Sydney's northern beaches, and by September taking possession of a new 96-foot vessel being built in South Africa.

This time last year he was knee-deep running the $1.4 billion company as a temporary stand-in chief executive for seven months.

He's convinced that after some rocky times, Blackmores is navigating a surer path. His father established the company in 1932. Marcus Blackmore as the largest shareholder, has a lot at a stake, although his exposure was trimmed this week to 21.5 per cent from 23 per cent after he declined to be part of a $92 million placement to institutions as Blackmores bolstered its balance sheet and gave itself extra headroom to drive an Asian expansion.

"Over time, make no mistake we will be an Asian company,'' he says. He'd rather it be through a partnership with a Chinese company, instead of having the company bought out. But he accepts the future lies north of Australia, even with the volatile geopolitics that has tempers fraying after the federal government angered China by calling for an inquiry into the origins of coronavirus.

He is enthusiastic about the company's new chief executive, Alastair Symington, who's been at the helm for eight months after a career in cosmetics, based in Dubai with Coty, owner of brands such as Max Factor and Cover Girl.

As the largest shareholder, Mr Blackmore stepped in to the top job as interim chief executive for much of last year after former chief executive Richard Henfrey departed in February 2019.

But managing a business in a coronavirus pandemic is something for a younger man.

"We live in very uncertain times. We will never go back to how things were,'' he says.

But despite the economic upheaval, he says for vitamin and supplement firms there is a silver lining.

"There's some really positive things for our industry down the line," he says, pointing to a greater focus on health and wellness by people overall, and official edicts by authorities such as the UK government which in late April advised everyone to take a Vitamin D supplement.

Blackmores' Vitamin C and other immunity-based product sales have been booming over the past few weeks, but many of its other ranges have suffered from the slowdown in foot traffic by shoppers as malls and shopping centres were ghost towns.

The company in February warned it wouldn't pay a dividend and on May 27 announced an overall $117 million capital raising that also includes a $25 million share purchase plan at the placement price of $72.50.

The dividend cut was a severe constriction of his cash flow and along with the cost of building his new house, part of the reason he steered clear of stumping up any new capital. Last financial year, Blackmores paid a total dividend of $2.20, meaning a payday of $8.8 million on his 4 million shares. Blackmores soared to a record share price of $220 in January 2016 on unprecedented demand from Chinese consumers chasing the ''clean and green'' lustre of high-quality Australian brands. Following the placement this week Blackmores shares are back above $81.

Mr Blackmore has also looked much, much further over the horizon to a time when he won't be around.

Borrowing from the estate-planning template of the late Paul Ramsay, the founder of $16 billion private health giant Ramsay Health Care, he is transferring 350,000 of his shares by June 30 into the Blackmore Foundation. It is a philanthropic entity that donates to universities and other organisations to fund research into naturopathic medicine.

Mr Ramsay, who died following a 2014 heart attack at the age of 78, left the bulk of his $3.5 billion estate to his personal foundation, the Paul Ramsay Foundation.

Mr Blackmore and Mr Ramsay were good friends. He pointed this week to the Paul Ramsay Foundation as a good structure.

In 2006 Mr Ramsay established the Paul Ramsay Foundation, which still remains the largest shareholder in Ramsay Health Care, despite selling $1.36 billion worth of stock in a block trade last September.

The Paul Ramsay Foundation is Australia’s biggest charity by assets and among the top 50 philanthropic foundations globally. Its grants are funded form the dividends of its Ramsay shareholding.

After the transfer of the Blackmores shares by June 30, Mr Blackmore will hold 19.6 per cent of Blackmores, and the Blackmores Foundation will hold 3.7 per cent of the company.

Blackmores reinvigoration

Blackmores, under Mr Symington, aims to reinvigorate its business by pushing much harder into pet vitamins and supplements, expanding into India, and chasing modern career women customers in China with a shift to more premium branding.

Mr Blackmore thinks the strategy is a winner, and with a new executive team in place after several hirings by Mr Symington, believes there will be solid growth.

"I don't expect there's going to be a miracle next week but we're certainly on the right track and it's the right way forward''.

Mr Symington says the capital raising gives some extra insurance if there's another outside shock to the economy and will enable Blackmores to push hard on its four-pronged plan and the Asian push. "There was very strong alignment around the boardroom table,'' he says.

Sam Teeger, an analyst at Citi, describes the Blackmores capital raising as ''sensible'' but says he would have preferred if it had been a bigger raising to reduce uncertainty in the COVID-19 pandemic and to further drive geographical diversification. He estimates one third of the company's sales are either to China or are ''China-influenced''.

He also points out that Blackmores is behind its big rival, Swisse, in entering India. Swisse gained "first-mover advantage by already launching in India in February 2020 through Amazon and 10 local e-commerce platforms'' Mr Teeger said. India is potentially significant over the longer term but is ''unlikely to move the dial in the short term''.