NeutraHealth proves acquisition model with first half profit
from its first two acquisitions in the first quarter of 2006,
indicating that integration has been swift and that its model of
snapping established but growing companies in the sector is a
shrewd one.
NeutraHealth was created in a bid to consolidate the many small players in the UK nutraceutical industry, a sector that has seen rapid growth in recent years but has had little attention from the financial market to date.
In its first set of half-year financials since trading activity began last August with the acquisition of Birmingham-based probiotic supplement-maker BioCare, NeutraHealth has reported a total turnover of £4.3m (c €6.3m) and operating profit of £0.75m (€1.1m).
Biocare, NeutraHealth's first acquisition for £16.1 million (€23.2m), is described as a "cornerstone" of the model. BioCare sells its products to dieticians and natural health practitioners and had an adjusted operating profit of £2.1m (€3.07m) in 2004, and turnover of £7.5m (€10.9m).
In the first half of 2006 BioCare sales have increased by 9 per cent, continuing a growth curve that saw sales increase by 10.5 per cent in full year 2004 over 2003.
Crucially, NeutraHealth is not seeking to bail out struggling companies, or help get start-ups off the ground. Rather, chairman Martin Gatto told NutraIngredients.com last year, it is "looking for companies with an established nature, seeing turnover of up to £15 million, and profitable."
There are companies in any market that are thinking how they can take their business onto the next stage," he said. "It is a case of finding companies at a crossroads in their development."
A second, bolt-on acquisition was announced in February of this year - Nutrigold. A far smaller investment at £0.5m (€0.73m) this was seen as an opportunity to realise synergies by bringing together order fulfilment and administrative functions.
"We are pleased with the group performance for the first half of the year. Strong profitable sales growth has been achieved quickly after acquisition," said chief executive Michael Toxvaerd. "We expect initiatives launched during the second half of the year to have a significant impact during the second half of the year as well."
Biocare, in particular, seems to be going places, with exports to Europe increasing 100 per cent year on year - an area of potential that was identified at the outset. Ten new products have come to market, and 12 nutritionalists have been appointed in the UK as ambassadors for the products.
Alongside continuing to build up these two, the board will continue in the second half of the year assess potential acquisitions and build relationships with targets.
However the route is not entirely paved with gold. In the first half of the year NeutraHealth was hit by abortive fees from withdrawing for acquisition processes that did not meet its criteria. Moreover the planned launch of NeutraHealth's lifestyle range was put back to this Autumn, while retail brand acquisition targets are pursued.
"Discussions with major high street retailers are ongoing and progressing well," said the company, which does not expect to see more than a 2 per cent prediction in anticipated growth this year as a result of the lifestyle launch delay.
