Just over a year ago, I did a deep dive into InNature Berhad (KLSE: INNATURE) (“InNature”). Since listing on in February 2020, the group saw its share price halved to RM0.32 within the space of two months.  

Fast forward to today, the stock has recovered back to its IPO price of RM0.64, marking a decent 100% gain for investors brave enough to scoop up shares in April 2020. 

InNature has also reported its latest financial results for the first quarter ended 31 March 2021. We will now delve into the group’s latest earnings to check on its recent business performance. 

1. Malaysia business update 

In Malaysia, Covid-19 headwinds precipitated the Movement Control Order (MCO) 2.0 in January 2021, but InNature managed to continue operations in most stores throughout 1Q2021. 

The lockdown resulted in much-reduced footfall throughout all malls which the group mitigated by its reach through e-commerce and Click/ Call and Collect (C&C) channels. 

Meanwhile, sales of Natura products nearly doubled year on year, underpinned by its social selling channels.

As a result, The Body Shop operations in Malaysia recorded a lesser decline in revenue of 3.1% and has returned to flat same-store sales growth (SSSG) of -0.6% in 1Q2021.

2. Vietnam business update

InNature’s Vietnam operations recorded revenue growth of 13.9% and SSSG of 5.6% for the reporting quarter. Generally, Vietnam’s retail environment benefited from the country’s milder Covid-19 situation in 1Q2021. 

3. Cambodia business update

InNature’s Cambodia operations were impacted by the rising Covid-19 cases during the reporting quarter. Nevertheless, Cambodia continued to register revenue growth of 39.1%, lifted mainly by its second store which was opened in 4Q2020. 

4. Store network and e-commerce contribution

The Group’s store count as of 31 March 2021 was 124 stores. During the reporting quarter, InNature opened its 38th store in Vietnam and exited one underperforming location in Malaysia.

(Source: 1Q2021 results presentation)

Interestingly, InNature’s e-commerce revenue has grown by 105.9% year on year, from RM1.5 million in 1Q2020 to RM3.2 million in 1Q2021. In fact, e-commerce contributed approximately 8.5% of the group’s revenue for 1Q2021.  

5. A strong rebound in profitability 

InNature’s profit after tax (PAT) was 85.4% higher amid improving operating margin due to continued vigilance on operating expenses, and the absence of listing-related expenses in the current financial period. 

Geographically, InNature’s The Body Shop (TBS) businesses in Malaysia, Vietnam and Cambodia were profitable in 1Q2021. Separately, its Natura business in Malaysia recorded high revenue and a lower initial gestational loss of RM0.6 million for the reporting quarter. 

6. Healthy balance sheet and cash flow

The group’s financial position remains healthy with a working capital of RM64.1 million and total equity of RM144.6 million as of 31 March 2021. The group generated net cash from operating activities of RM13.6 million during the reporting quarter and maintained a healthy cash balance (including fixed deposits and fixed-income funds under other investments) of RM56.2 million as at 31 March 2021. 

(Source: 1Q2021 results presentation)

7. Dividend 

InNature declared a single-tier dividend of 1.5 sen per ordinary share comprising (i) second interim dividend of 1.0 sen per ordinary shares for the financial year ended 31 December 2020, and (ii) first interim dividend of 0.5 sen per ordinary shares for the financial year ending 31 December 2021. With this declaration, the group’s dividend payout ratio would be 70.0% for the financial year ended 31 December 2020, and 69.3% for 1Q2021.  

8. Outlook

The waves of Covid-19 will continue to be a key limiting factor of the group’s performance for the financial year ending 31 December 2021. InNature pledges to continue to vigorously execute its digitalisation and Omni-channel initiatives, and aims to provide more convenience, faster access and better customer experience for everyone who comes into contact with the group. 

Overall, the group believes it will remain resilient and profitable in FY2021, and in doing so, look forward to continuing with its dividend policy and relentless efforts towards its vision of InNature as a Force for Good, by continuing its sustainability and social initiatives for the community.

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