Healthzone collapse compromises 80 franchisees

Health products chain Healthzone Limited’s 80 franchised and 30 company-owned stores will continue to trade in the short-term, despite the business being placed into receivership.

The ASX-listed company, which produces and distributes natural health products to a wide range of retailers across Australia, Asia, Europe and the United States, has around 250 employees.

The company has 110 stores, 80 of which are franchised. Despite its collapse, the receivers insist Healthzone will continue to operate as usual.

PPB Advisory announced on Friday the company has been placed into receivership, with Phil Carter and Chris Hall appointed receivers and managers.

Meanwhile, HLB Mann Judd has appointed Barry Taylor and Andrew Needham as voluntary administrators.

According to Carter, Healthzone and its related entities will continue to “operate on a business as usual basis”, while key stakeholders will be kept informed of developments.

“We will work constructively with Healthzone’s employees, franchisees, suppliers and other stakeholders to ensure the business continues to operate effectively,” Carter said in a statement.

“The receivers are now undertaking a review of the business and intend to prepare it for sale as a going concern.”

The business, which is more than 25 years old, remains profitable, with its most recent financial report revealing a profit of $2.9 million after tax, with revenue of $90 million.

However, that fell from revenue of $110 million, and a profit of $4.3 million, in 2010.

In October, the company finalised a capital raising of $9.9 million, with chairman Peter Roach saying the funds would be used to help promote its Healthy Life China brand and the development of high-margin proprietary products.

That shift to high-margin products was noted in its annual report, with the company saying it had begun a restructure of the business to “an improved mix of higher margin distributed products… delivering even higher gross margins”.

Although Healthzone said its profits had risen 22% as a result, top line revenues had fallen 17% in a transition period.

It also noted that a third supplier was affected by a lack of stock, “resulting in lost sales for both distribution and retail business units”.

In addition, Healthzone noted difficult market conditions in retail, saying 2010-11 had been “one of significant change in the market and our business”.

Healthzone finalised another capital raising earlier in the year worth $20 million. The business was also in the process of listing on the NASDAQ in the United States.