Vitamin maker Blackmores has announced the resignation of chief executive Christine Holgate after nine years in the job. Holgate will be moving to Australia Post to take up the chief executive role in September (sounds like a poisoned chalice to us—Ed).
Director and major shareholder Marcus Blackmore will return as interim chief executive while the board searches for a new chief. Chairman Stephen Chapman said there are already potential CEO candidates in place, suggesting that internal candidates are being considered. Marcus Blackmore will remain in a managing role as ‘Brand President’ after the new head arrives.
The company’s share price has been on a steady decline in recent months after a poor 2017 interim result. A combination of lower overall volumes and higher ingredient costs meant that earnings before interest and tax (EBIT) fell 40% in the six months to December, with the operating margin declining from 24.3% 15.9%.
Blackmores trades on a price-earnings ratio of 24 and has a dividend yield of 3.6%. Notwithstanding the most recent interim result, Blackmores' growth under Holgate has been exceptional – sales tripled – and she will be a tough act to follow. With decent long-term growth prospects, economies of scale and a solid brand, we continue to recommend that you HOLD.