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Blackmores: CEO's departure best for 'transformation' of company

Lex Hall  |  26 Feb 2019Text size  Decrease  Increase  |  
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Blackmores' chief executive Richard Henfrey will resign when a replacement is found. Image: Blackmores

Former Blackmores (ASX: BKL) chairman Marcus Blackmore says it was mutually agreed that CEO Richard Henfrey should resign because the vitamin maker needed a transformation.

Blackmore, the company's largest shareholder, said the departure of Henfrey - after just 18 months in the job - had nothing to do with last week’s poor profit update and forecast poor sales in China.

"[Henfrey] has been with the company for more than 10 years and done some very good stuff for us," Blackmore told The Australian today from Indonesia, shortly after the news was announced on Tuesday morning.

"The board believes it is time for a substantial amount of transformation in the business. The board sat down with Richard and the end result was that he said it was time for him to move on."

Henfrey, who has been with the company in a variety of executive roles since April 2009, will remain in the position while the board searches for a new CEO.

He has been in the role since August 2017, when he took over from Christine Holgate.
The company initially gave no reason for his resignation.

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Blackmores shares hit an 18-month low last week after the vitamin maker told investors not to expect an increase in sales to China.

Blackmore shares were down 3.82 per cent, or $3.64, to $91.56 at 1.10pm Sydney time.

Blackmore, who has an 18 per cent stake in the company and is still a director on the board, told The Australian Henfrey's resignation was not necessarily related to last week’s fall in the share price.

"All our business units, whether it's Indonesia, Thailand, Malaysia or Australia are going well, we just had this kick up in China. But that is not related to Richard's resigning,” Blackmore said.

"The board was certainly in discussion with the CEO about where the business was going, what we needed to do and what sort of leadership we needed.

"I had said to the board that I think it is in Richard’s interest if he doesn’t feel he is the person to take us through the next transformation of the business then he should think about resigning, which he has done.”

Morningstar downgraded its fair value estimate for Blackmores in the wake of the company’s first-half result.

Previously at $135, the narrow-moat stock now carries a fair value estimate of $105, a fall of 22 per cent. The stock now screens as marginally undervalued.

The company posted a record first-half revenue of $319 million – a rise of 11 per cent on the previous corresponding period.

Revenue in Australia and New Zealand grew 19 per cent on the prior corresponding period.
The company also reported strong sales in Asian markets. Korea rose 67 per cent, Taiwan 150 per cent and Hong Kong 39 per cent.

However, Henfrey said that despite continued investment in advertising and promotion, the dent in China sales had taken a toll.

"Due to this planned investment in the period and a softening in China growth, there has been a short-term impact on profit growth."

The company said it was conducting a review of its investment approach in China and the impact of "channel shifts", or more Australian retailers directly directing the China export trade.

is senior editor for Morningstar Australia

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