Vitaco listing debut for food supplements firm

Healtheries New ZealandVitaco Health Group, the food supplements business formed through the merger of Healtheries New Zealand and Nutra-Life & Fitness, made its debut on the ASX after almost a decade under private equity ownership. Its shares increased 19 per cent.

Vitaco’s IPO, which raised $231.6 million, closed heavily oversubscribed following broad support from a range of brand name Australian and Asian fund managers as well as strong support from retail investors. The funds raised from the IPO will underpin the next phase of the company’s growth as it consolidates its position in the Australian and NZ markets and continues its expansion into international markets, including China, Brazil, and the UK.

The stock opened at A$2.50, a premium to the A$2.10 price the shares were sold at the IPO, and recently traded at A$2.42.

The group’s CEO, Ryan d’Almeida said it was  a “tremendous start” as a publicly listed company.

“We are delighted to mark the next chapter in Vitaco’s growth with our ASX listing and are particularly pleased to welcome our new Vitaco shareholders, including a number of highly regarded Australian, NZ and international fund managers. Investors have responded enthusiastically to the company’s solid growth prospects as consumers both in Australia and around the world pursue increasingly healthy lifestyles.”

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 per cent of annual revenue from its NZ business, and manufactures most of its products at two facilities in Auckland.

“NZ is the foundation of our business – it represents 40 per cent of revenue and it’s the place where we do most of our manufacturing – it’s absolutely central to the business model,” d’Almeida said.

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

The perceived quality of NZ and Australia was a selling point as it enters international markets, including China, the UK, and South America, with the fact that it manufactures its own products a point of difference, D’Almeida said.

“They like products made in Australia and NZ,” he said.

“The well-deserved reputation of Australia and NZ as  ‘clean and green’ manufacturers of nutritional products provides Vitaco with a competitive edge, particularly in the high-growth Chinese market, which is demonstrating an increased appetite for products such as milk biscuits and nutritional supplements.

“Each day more than a third of Australians take some form of dietary supplement, which underscores well the strength of the Australian and NZ markets for vitamins and dietary supplements, which is valued at more than two billion dollars. The burgeoning sports nutrition market in Australia and NZ is now the world’s second largest, valued at more than eight hundred and forty million dollars.”

Vitaco is bedding in its most recent acquisition of the Musashi brand, which d’Almeida expects will be fully integrated before Christmas, and will look at potential acquisitions in Australia and NZ, with the market still “relatively fragmented.”

The company anticipates annual revenue will rise to A$211.3 million in the year ending June 30, 2016, from A$172.4 million a year earlier, generating a net profit of A$15.4 million, up from A$11.1 million in 2015. Vitaco is expected to pay a dividend of between 50 per cent and 60 per cent of pro-forma net profit from 2016.

Vitaco has a blue chip client base in Australasia from which its largest clients include retail grocers Woolworths and Coles and pharmacies The Chemist Warehouse and Priceline (via Sigma Pharmaceuticals) in Australia. In NZ its largest clients include Progressive Enterprises and Foodstuffs. 

The company’s board of directors include: chairman, Greg Richards, a former equity partner of Goldman Sachs JB with over 25 years’ experience in the banking and financial markets sector; CEO, Ryan d’Almeida, who has held senior management roles in the food and nutrition industry for 20 years, including experience with Retail Food Group and Weight Watchers; as well as independent non-executive director Emmet Hobbs, chairman of Hirepool, Hydraulic NZ, Hydraulink Australia and the Carr Group; Katrina Onishi, who has held several senior executive positions in funds management roles at Lend Lease, Invesco, State Superannuation Board of NSW and AMP; and Sandy Lockhart, a 35-year industry veteran of private equity investment, a founding partner of private equity management firm Next Capital and former executive director of Macquarie Bank.

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