Bubs (ASX:BUB) share price jumps 10% amid 73% revenue growth

The Bubs Australia Ltd (ASX: BUB) share price has been a strong performer on Wednesday.

At the time of writing, the infant formula company’s shares are up 10% to 47.5 cents following the release of its half year results.

Bubs share price jumps on strong first half growth

• Gross revenue up 73% over the prior corresponding period to a record of $38.5 million
• Gross margin improved to 38%
• Underlying EBITDA of $1.2 million
• Loss before tax of $0.6 million
• Cash balance of $30.6 million
• Outlook: Modest half on half growth expected in the second half

What happened during the first half?

For the six months ended 31 December, Bubs reported a 73% increase in gross revenue to a record of $38.5 million.

This top line growth was underpinned by the doubling of its infant formula revenue during the period thanks largely to record revenue from the Corporate Daigou channel. Gross revenue in the channel grew 276% and now exceeds pre-COVID levels. This is being driven by early success from its Daigou 2.0 strategy.

Bubs Australia also notes that it continues to be the fastest growing infant formula manufacturer in Chemist Warehouse and Australia’s big two supermarket chains. Though, it is worth remembering that it the company is growing from a much smaller base than its main rivals. So, these statistics are encouraging, but may be best taken with a pinch of salt. It now has a 3.9% market share.

Management commentary

Bubs Founder and CEO, Kristy Carr, was pleased with the half.

She said: “Bubs is pleased to report its first half year to realise an underlying EBITDA profit. This was a product of management’s uncompromising focus and ability to execute on strategic initiatives with precision, notwithstanding challenging macro-economic conditions.”

“The fact we have been able to return to a growth trajectory speaks to our corporate DNA and our ability to navigate ways forward in a volatile environment. We see potential upside in Australia’s borders reopening with the return of Chinese students, although continuing challenging market conditions are expected to remain for some time.”

Outlook

One thing that could be holding back the Bubs share price from charging even higher is its outlook.

Bubs Executive Chair, Dennis Lin, revealed that the company’s growth is expected to moderate in the second half, with only modest half on half growth.

He said: “Management expects 2H22 to deliver modest Half on Half growth in Revenue, and underlying EBITDA with revenue realisation from earlier new business development coming through in Q4 and after taking into account the seasonally quieter Q3.”

“While our forward plans aren’t contingent on COVID dislocations resolving quickly, we continue to exercise caution as pandemic related effects and macro-economic uncertainties remain that could result in transitory variability,” Mr Lin concluded.

The post Bubs (ASX:BUB) share price jumps 10% amid 73% revenue growth appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended BUBS AUST FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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