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Edited Transcript of 1112.HK earnings conference call or presentation 24-Mar-20 2:00am GMT

Full Year 2019 Health and Happiness (H&H) International Holdings Ltd Earnings Call

Mar 26, 2020 (Thomson StreetEvents) -- Edited Transcript of Health and Happiness (H&H) International Holdings Ltd earnings conference call or presentation Tuesday, March 24, 2020 at 2:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Fei Luo

Health and Happiness (H&H) International Holdings Limited - Chairman of the Board

* Joy Tsai

* Laetitia Marie Edmee Jehanne E. P. Garnier

Health and Happiness (H&H) International Holdings Limited - CEO & Executive Director

* Yidong Wang

Health and Happiness (H&H) International Holdings Limited - CFO & Executive Director

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Presentation

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Operator [1]

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Good morning, ladies and gentlemen. Welcome to the 2019 Annual Results Presentation for Health and Happiness International Holdings Limited. Joining us today is Mr. Luo Fei, Chairman; Ms. Laetitia Garnier, Chief Executive Officer; Mr. Jason Wang, Chief Financial Officer; Ms. Joy Tsai, Investor Relations Director.

Kindly note that the webcast is audio only, and there is no video. During today's presentation, Mr. Luo will first give his opening remarks.

After which Ms. Garnier will present the group's business review. Following this, Mr. Wang will present the group's financial review. After which, Ms. Garnier will discuss the group's outlook. After this, we will take questions. (Operator Instructions) I will now pass it over to Mr. Luo Fei for his opening remarks. Mr. Luo, please.

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Fei Luo, Health and Happiness (H&H) International Holdings Limited - Chairman of the Board [2]

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And dear investors from all around the world, good morning, and welcome to H&H Group's 2019 Annual Results Conference.

One of us would have thought, now we have to hold our annual result meeting in this way through the phone in this very (inaudible), volatility and severity, complexity and security. We are going to (inaudible) to respond quickly to a fastly changing environment, becomes more and more important. And to able to adapt to grow, while maintaining a reasonable quality level has proven even more challenging in this environment.

2019 has marked the 20th Anniversary of H&H. At the beginning of 2019, our Swisse and daigou business has been heavily and deeply impacted by new Chinese e-commerce law. However, our management team has been able to quickly adjust their strategy to adapt to this market change. I believe the results we have achieved as a group in 2019 under such a challenging environment is already quite satisfactory.

We acquired (inaudible) to our 2 core business categories, BNC and ANC. Last year, our BNC business has met our original expectations, while the growth of our ANC business in China has been able to almost compensate for the decline of revenue in Australia.

At the same time, we have entered into new markets and new categories according to our group strategy. As a result, we have been able to achieve double-digit growth in our net profit in 2019. After carefully considering our 2020 business outlook and cash requirements, we are proud to announce a 50% dividend payout. This is a way to return to our shareholders and thank them for their long term support.

I will now pass it over to our CEO, Laetitia Garnier, to present to all of you. Thank you.

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Laetitia Marie Edmee Jehanne E. P. Garnier, Health and Happiness (H&H) International Holdings Limited - CEO & Executive Director [3]

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Thank you, Fei, and good morning, everyone. I hope you can hear me well. Indeed, exceptional circumstances, exceptional arrangements. That's why we are moving to this webcast this morning. We have to adapt our ways of communication and our ways of working in this very changing environment. First of all, I assume that many of you are also calling from home or remote places. We hope you are all safe and healthy, which is obviously the most important thing in the current circumstances.

2019 has been indeed a challenging year for H&H with many external changes, but it has also been a great opportunity for us as an organization, as Fei mentioned, to adjust, to adapt our organization, our team, our strategy, to improve our processes, to improve our efficiencies, the way we spend, the way we go to consumers, while maintaining a healthy, profitable growth and to be able to continue some strategic investments that we had committed to the market with new businesses and new markets, because we believe these are crucial for the future of our growth.

2020, obviously, is starting in a very unpredictable way, very different from what we had expected. But again, with new challenges from new opportunities and what was, at the beginning of the year, an epidemic in China has transformed into a global pandemic. There so how we, as an organization, how we react, how we manage risk, how we change, how we adapt as a global organization, again, will prove to be for us, if we manage to go through this, actually a huge opportunity as a global wellness company to be able to capture rising demand for health-related products.

I'm sure you will have a lot of questions around the current situation. But let's come back first to our 2019 results, which is the main topic of this presentation first.

We have, as you've seen in our numbers, been able to achieve, in a very challenging environment last year, still a positive growth at 7.8% as a total revenue and we will see, and as Fei already touched upon, different dynamics and different performance in our BNC and ANC segment because most of the pressure has come from ANC in Australia. But the rest of the business, we can say, has performed according to our original expectations.

From an adjusted EBITDA margin, which is perhaps the most reflective number of our operating efficiency, it has dropped to 9.9% in 2019. As a result, both of a lower-than-expected performance in the ANC Australian business, but also because we have decided during the course of last year to maintain some strategic investments that we had planned from the beginning that we think, again, are important for the future. You will also see that's our adjusted to reported EBITDA in terms of difference that the gap has narrowed as a result of a reduction of adjustment items that Jason will walk you through later on in the presentation.

As a final result, our net profitability has still been able to achieve, as Fei mentioned, a strong double-digit growth at 19.2%. Obviously, as a result of lowered costs of financing as one of the main reasons. And Jason will again give you more color on that. But we think we are, again, satisfied about this net profit growth. In such challenging environment of last year, we've been able to stretch ourselves, increase our efficiencies and again, reduce the cost of our debt, which is very important. At the same time, we have maintained a high cash flow conversion model as our business model hasn't been fundamentally changed with over 90% rate of cash flow conversion, which is a good performance. We've been able to really manage well our inventory situation last year, particularly in the second half of the year, post Australian challenges. And as a result, Fei already touched upon that, after considering our business outlook, but also our business and our financial needs, we are happy to report that 50% dividend payout, which is a way for the company to come back to a high dividend payout ratio, which has been the case in the past and that had been discontinued for 3 years after the acquisition of Swisse, during which time we had been very focused on deleveraging our business. And we are now back into a position to pay a high dividend ratio and to retribute our shareholders, which we hope will be a good news for our equity investors.

If we move on to Page 6. And if we have a zoom at our performance per territory, obviously, everyone will know that China continues to be our core market. And China has actually performed well over the course of 2019, both in BNC and ANC with a 17.7% growth on a reported currency base, but on a currency-adjusted base is actually even higher. A weak performance in ANZ, Australia and New Zealand for the ANC business as a result of the change of the e-commerce law at the beginning of last year. So full year impact at the beginning of last year, we didn't know how long will be that impact. It has obviously gone out through the full year, and we are now already resetting the base as we speak, with individual daigous somehow exiting the business in Australia.

For the rest of the world, strong performance in line with our willingness to continue to develop again into new markets outside of China and also Australia and New Zealand. And that strategy is now paying off. We've got a 43% growth in those areas in full year 2019.

On Page 7, the key message here is mainly that we have been, under such challenges, been able to maintain revenue growth and a healthy EBITDA margin, of course, as EBITDA margin has dropped last year as a result of higher selling and expenses ratio mostly, but still above 20%, which in the circumstances we faced last year was perhaps not an easy performance, while we continued to maintain strategic investments into new markets and new categories. From a revenue growth, of course, again, BNC and ANC are seeing different dynamics.

A 17.8% growth in BNC, while a negative 3.1% in ANC, again, as a result of the drop in Australia last year.

On the next page, Page 8. If we have a zoom at our BNC performance. It has been very much in line with our original expectations when we were with you one year ago. We were talking about our confidence to be able to continue to grow, both in our core BNC segment, which is infant formula, but also in the probiotics segment, a highly profitable category for us. And you can see, if you remember our first half results, you can see an acceleration of that growth during the second half of last year, in line with strong market demand and also some new sales and marketing opportunities that we have put in place together, I'll come back to that later. But also now really a third pillar of that BNC segment is accelerating, and that is what we call other pediatric products, namely, Dodie, diapers and babies accessories, but also Good Goût, our healthy baby and kids organic food brand that we acquired from France in 2018.

For the first time, we are actually -- we have been disclosing the total contribution of those 2 brands in a spirit of higher transparency and because they've start to become quite material. So we've achieved for Dodie in China over RMB 300 million of revenue in 2019. And for Good Goût, combining France and China, we have also achieved over RMB 150 million. So those 2 segments start to become material and are seeing strong growth that is obviously fueling the growth of our total BNC segment and also enabling synergies between the different categories when we go and talk to our retailers and our consumers.

On Page 9 on ANC. Obviously, some challenging market dynamics in Australia. And again, as mentioned, the impact has been throughout the year. And versus in China, in line with our strategy when we acquired the business in 2019 to accelerate the active sales into China, we have seen a strong performance, over 29% on a currency-adjusted basis of growth in China. And China has become, by the end of last year, a bigger business for us for Swisse versus Australia and New Zealand. So it's now our #1 market according to our original strategy.

On Page 10, very quickly, the point here is really to mention that we have carried on through 2019, our strategy to diversify our portfolio of brand and products in the premium wellness segment. It is consistent with our mission and our vision, and it is helping us to capture emerging trends and to maximize opportunities across different categories. So we'll continue to carry on that strategy.

As well as on Page 11, our marketing model. This is now familiar to most of you. I just want to highlight here the engaging parts, which I think throughout 2019 has been a key focus for us. How can we build better content? How can we enhance digital capabilities? How can be more consumer-centric? And make sure that what we put to the consumer is not just inspiring, but it's actually converting into sales? Having more of a proven model to consumer to be sure that we are relevant to them. And that becomes, obviously, even more a topic today in the current environment, where people are buying more online, are being ever more digital now that they are working or living in home in confinement and have to find new ways of consuming. So the touch point to the consumer and our ability to excel in this field is becoming more and more critical.

If we look at our business review, on Page 13, first of all, obviously, infant formula is still our #1 category. And despite the decreasing growth rate throughout the course of the last years, in 2019, the industry has still grown 7.6% value growth for the total IMF segment according to Nielsen in 2019. And actually, a slight rebound in the last quarter of last year, if you remember the previous data. So the market is still growing and particularly in the premium and super premium segments there is still a high double-digit growth. And this is really where Biostime as a brand is playing. So you can see in the super premium tier, we've been able to maintain, as one of the leading brand, a certain position in the market in a very competitive environment with a particularly high push of local domestic players, while international players are performing slightly weaker. We've been kind of in the middle, really holding on to our market share, continuing our efforts to penetrate into more stores and to also carry on our relationships with our key retailer and our key partners.

A particularly strong performance of our super-premium and super premium plus categories with our organic infant formula, Healthy Times, which is growing ahead of the market. And also the introduction, in the last quarter of last year of our super premium, goat infant formula. I will come back to these 2 in a second.

I will pass on quickly to Slide 14, but if you want to have a better kind of view per channel of our performance. Obviously, the baby store channel, which is a very critical channel is highly competitive, but we've been able, through again, partnering very strongly with our retailers to keep one of the leading positions in that channel where a lot of particularly domestic players are massively entering. So our challenge, but also our opportunity going forward is to be able to increase our penetration into more stores, and we'll come back to it to make sure we keep that leading edge in that channel. We've had also a strong performance in super hypermarket and also online. And I know a lot of you are always questioning our ability to grow in a very competitive online market. I think our performance online in 2019 has been good without being dilutive to our earnings because of that digital content and that connection with millennials that our team has been able to create and to make Biostime a more sought after brand for young consumers.

On the next page, I just touched upon, again, digitalization. And obviously throughout the beginning of 2020, with the COVID-19 outbreak, it has been more important than ever to be able to connect directly to the consumer. So we have actually changed our way of new customer acquisition, engagement and education with consumer by really becoming truly digital. So we are carrying live webcasts and digital communities enhancement with our partners throughout the whole organization and the whole country. And so really rethinking the way we go to consumer, and this is proving to be quite efficient. Another good news that we've got just a few weeks ago, back to how we can enhance a stronger penetration into more stores. We just got approved, some of you might have seen the news, a new SKU registration from France just a few weeks ago by SAMR, which is going to enable us, towards the end of this year, because we now need to produce and get this product to the market, will be able to help us differentiate per channel and have different products to address different distribution channels to penetrate, particularly into more baby stores going forward. So that will be a new tool for us for a further distribution penetration into, particularly the baby store channel.

On Page 16, on Healthy Times. As mentioned, Healthy Times performed well ahead of the market, 33.8% growth versus 22% for the market. And penetrated into more baby stores, we are now available in more than 1,000 stores. So we've been leveraging our distribution channel and accelerating the availability of the product into more stores, particularly in the second half of the year. We are now the fourth organic infant formula brand, total channel in the Chinese market, and we are obviously aiming at being part of the top 3 as soon as we can.

On Page 17, I touched upon that a bit earlier. We had a very successful launch of our goat infant formula, made in Australia, following the acquisition that we made in 2018 of a registration and a factory in Australia, able to produce goat infant formula.

The team has worked extremely diligently into building a strong supply chain to secure, obviously, enough raw material, enough dairy, goat dairy ingredients and to produce on time for the launch.

It has just been 1.5 years of sales, but we have generated over CNY 100 million of sales of this product for the channel pipeline filling that we did towards the end of last year, and we are seeing very strong demand for this product. So obviously, throughout 2020, goat infant formula will be one of the key components of our growth into the super premium category of IMF.

On Page 18, we've been talking a lot about our intention to go outside of China and expand the Biostime brand globally. And without going too much into details, there is one outstanding performance that we are quite proud of because we've been talking about it for some time. We have launched, as you know, Biostime into the French market, where it is actually produced with Isigny in 2017 and have penetrated into the pharmacy channel in 2018 only. And we just got the data of January 2020. And as you can see on the pie chart, we have become the #1 organic infant formula brand in the French pharmacy channel, which is an amazing achievement for a brand that was unknown in the market only 2 years ago.

And that obviously is due to both strong branding, a very digital marketing to millennials, French moms, but also a leverage of our existing sales force in the French market.

So it's a great achievement. Some -- in companies that are going global, you need some success stories like that to encourage and inspire the team, and that is truly an inspiring achievement for us, and we'll continue to strive as France is still IMF's largest markets in the European Union and a market that is -- that deserves to continue to invest in.

In the next slide, 19, Page 19, I touched upon the acceleration of our growth in the probiotics segment.

We've launched a new version of our probiotic in drops format, which is more suitable for small babies and obviously has received good consumer feedback.

Our sales of probiotic also in other geographies in France and Australia, where we've launched, is also doing well. And obviously, without saying -- with the current huge rise of our immunity products in the current context, we are very certain that our proposition is really resonating well to consumers. And we are obviously leveraging our #1 global children probiotic supplement claim and position to put ourselves in the best position to secure this rising demand for immunity products and probiotics for children.

On Page 20. A good performance of Dodie, particularly in the Chinese market last year, as mentioned, over CNY 300 million of sales, and Dodie has already entered into the top 3 of super-premium diapers in China. Yes, there is a super-premium segment even in the diaper, that might sound unfamiliar to some foreign investors. Investors who are familiar with the Chinese market might understand better that just like infant formula, moms in China are looking for high-end products with different experience. And Dodie is combining well, a very good product performance with a very soft product experience, which is appealing to consumer, and we've got a good brand, 60 years brand from France, a great brand ambassador. So I think the winning recipe for us and a good supply chain with our partner in Hangzhou. So we are very satisfied with the growth of Dodie throughout 2019. We obviously need to grow both in baby stores and online going forward, and we'll continue to capture the growth opportunity of that segment. Another good performance in our baby and kids healthy organic food brand, Good Goût, which is also a new baby of the group since 2018, again, 175% of growth, of course, not like-to-like because in 2018, we only consolidated partly as we acquired the company in July, but still a double-digit growth in the French market, in a market which is highly competitive. Good Goût's proposition is very -- is resonating very well with millennial parents in our responsible brands, all about organic and bringing the best of taste and healthiness to your kids. We obviously have appointed a great ambassador, Kylian Mbappé, which has helped to further accelerate the growth and the relevancy of the brand.

And beyond, again, the baby segment, we strongly believe that kids healthy food is a market of choice that we should invest in, and we are seeing a lot of good traction from our -- particularly from our e-commerce partners in China that really believe in this category.

ANC business on Page 23, obviously, despite challenges in the Australian market, we've continued to keep a leading position, both in Australia and in China. So last year in Australia was obviously challenging, but it hasn't been just a Swisse problem. It was an industry problem because of the disappearance of the individual daigous. All the brands have been impacted, but Swisse as a brand has obviously continued to be one of the leading brands in the country, and it's important for us that we keep on this leading position. And in China, online market, of course, China has had its challenge also last year with the government initiative and cracking down on some illegal practices in the direct sales channel that also has impacted the growth in China, but the e-commerce channel has been quite resilient.

And so as a transition to Page 24, we have seen a strong performance of our brand, both on cross-border e-commerce, but also in normal trade. And it's quite important for us, obviously, to have this multichannel strategy to derisk and diversify into the broader normal trade, particularly in the pharmacy channel, but also leveraging our baby stores, leveraging personal care, supermarkets and even cosmetic stores.

In normal trade, the pharmacy channel has been performing quite well, particularly, and we have been able to acquire more blue hats. And as we go into 2020, obviously, we want to continue to have more products. So by the end of last year, we had 23 SKUs, and where we're selling more than 22,000 stores, which is an acceleration of our offline footprint. Going forward, we need to continue to grow brand awareness and continue to focus on delivering the right strategy and consumer education on several categories, including beauty from within, maternal baby supplements, bone health and general wellness, et cetera. So our teams are working into those subcategory strategies to continue to make sure the brand is very relevant to different consumer groups.

In Australia, Page 25. As mentioned several times, the challenges we faced last year, the individual daigous that had to go out of trade haven't come back. So again, a full year impact. And as we speak now, they obviously haven't come back. There's actually additional challenges linked to the COVID-19 outbreak with not being able to ship products to China. So definitely, going forward, our Australian business will be a more domestic play. And at the same time, working with larger, more organized business daigous, which are really the 2 pillars of our Australian business. The team has really refocused strategically into addressing the local consumers with very good marketing campaigns that are targeting the needs of the young Australian consumers, and we are currently seeing good traction in our domestic sales.

As a global rollout of our brand, Page 26 and quickly upon that, you know that we have the strategy to expand the brand in new regions, and particularly, Southeast Asia and Asia more broadly is a focus for us. We have been proud to be able to launch Swisse online in India in February. We on purposely refocused on the full e-commerce launch. We do not aim at going offline in India. The young, modern and wealthy consumers are -- in India, are buying online, and that is a way for us to be more agile, more targeted. And so we are very happy with the beginning of this launch, of course, to be followed, and we are also aiming at entering into other Asian markets within this year, including Malaysia, Thailand and Taiwan.

I will pass on quickly to the next slide. I will not comment them one by one, but I would like to spend 1 minute on Slide 29, please. On the sustainability development, just obviously, our commitment as a global wellness organization to be really putting more and more efforts on sustainability. So I guess, first of all, from a giving back to society perspective and from a donation perspective, 2019, but even more, the beginning of 2020 have been tremendous opportunities for us to be able, as an organization, to donate because there has been huge needs. Obviously, the bushfires in Australia and the COVID-19 outbreak in China followed by the global pandemic. So we have been giving donations so far of over RMB 9 million equivalent in different currencies in forms of cash or products to organizations that have been needing, desperately needing those. From a little more long-term perspective, we have set up for ourself, the goal to become a certified B Corporation. B Corporation is a nonprofit organization from the U.S., for those of you who might know it. And it's today dereferenced from both an institutional, but also a consumer perspective of responsible companies that are certified for their good sustainability practices and particularly in 5 key areas, which are not just environment, because (inaudible) mostly sustainability is environment, but actually, governance, how are you being more transparent, better increasing your, not corporate governance. So governance is one area. Employees, community, obviously, environment, and the last one being consumer -- sorry, customer value chain management. So in those 5 areas, we have set up a clear road map to get this certification by 2025. It is a long and complex road map to be able to achieve and fulfill all these criteria. But we think following this path will enable us as an organization to become a better world citizen, to just become a better company to all of our stakeholders, including our investors and also to be more consumer-centric, because this is what consumers are asking for.

And I think as an organization, as a wellness global organization, we have a role to play in this context. And so becoming a B Corp company will help us in this way.

I will now pass it over to Jason to comment on our financial performance. Thank you.

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Yidong Wang, Health and Happiness (H&H) International Holdings Limited - CFO & Executive Director [4]

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Thanks, Laetitia. So despite many challenges encountered in 2019, we maintained overall a very healthy financial performance.

So in Page 32, as you can see, we have maintained a stable gross profit margin at 66.2%. We have list this year, the gross margin development for the four main product categories in this slide.

So the gross margin of the IMF just decreased slightly to 65.8%, mainly due to the product mix change towards the higher revenue proportion from the goat milk and organic IMF product sales, because these 2 new categories have a slightly lower gross margin in comparison with the regular Biostime branded IMF series. The gross margin of the probiotics came down very slightly by 0.3 percentage points, mainly due to the formula upgrade and the depreciation of RMB against the U.S. dollars in 2019. The gross profit margin of other pediatric products also came down a bit due to the higher proportion of sales from Dodie Diaper and the Good Goût products. But we are very happy that the gross margin of ANC increased from 64.5% in 2018 to 65.6% in 2019, which is in line with our plan, thanks to the more favorable product mix as well as the increase of sales prices for certain SKUs in 2019.

In Page 33, you can see our group selling and distribution expenses increased by 21% to RMB 4.36 billion. The S&D expense as the percentage of the revenue increased by 4.4 percentage points to 46 -- 40% in 2019. As you may recall from our interim result, the S&D ratio in the first half of 2019 increased by 5 percentage points. And during our interim result communication, we already indicated that due to the planned launch of new category -- new product categories in the second half, we expect the increase of this ratio on a full year basis will be at the same scale as the increase we have seen in the first half. And this is really driven by the strategic investments in the new markets and the new product categories as well as due to the underperformance in the ANZ market. The S&D expense ratio of BNC increased by 1.6 percentage points from 39.8% in 2018 to 31.4% in 2019. And this increase was mainly because the group launched Biostime branded IMF and probiotics products in Australia at the beginning of 2019, launched goat milk IMF product in Australia, Hong Kong and China in the second half.

With the first -- the full year consolidation of Good Goût business into the group and also launched the Good Goût business in China since last May. The S&D ratio of ANC increased by 7.6 percentage points from 29.7% in 2018 to 37.3% in 2019.

This increase was mainly due to the market mix towards higher proportion of sales from the Chinese market based on the continued high-growth of China business and the decline of the ANZ business.

The higher investment in the marketing and channels in China was required to further enhance the brand awareness and to build up the scale, both online and offline. We see this investment is quite necessary, given the still relatively low penetration of the Swisse products among Chinese consumers, especially in lower-tier cities. The expense ratio increased for ANC was also due to the full year consolidation of our former PGT territories into -- in 2019. While, as you remember, the most of other PGT territories were only consolidated for half a year in 2018. And this is also the first year for the consolidation of Aurelia since the acquisition was completed in January 2019, and is also the first year to launch our Swisse Me D2C business.

Even though we see these investments are very critical to enable the group to drive the strategic growth initiatives, the group has implemented strict financial control. So as you can see from the top orange section of the left hand bar listed in Page 34, the S&D expenses for the new markets and new product categories only accounted for 3.9% of the group's revenue. So in comparison with the other 40% total S&D expense ratio, this means that the group has spent less than 10% of total S&D expenses in new markets and new categories.

Exactly, its reasonable spending level to balance between the need to invest in new initiatives and the need to maintain a healthy profitability.

In Page 35 regarding the admin expenses, thanks to the spending efficiency improvement, the admin expense ratio improved 35.3 percentage points from 6.1% in 2018 to 5.8% in 2019.

In order to provide full transparency, we also listed the EBITDA and net profit adjustment items in Page 36.

I will not go through line-by-line here in this slide. But the key message is that, after the group completed its integration in 2018, the special adjusted amount has been significantly reduced in 2019.

As you can see the differences between adjusted and the reported results are now very small. This positive development is in line with the direction we indicated before.

The adjustments made in 2019 are mainly related to the group's refinancing exercise last year, during which we incurred the early redemption cost for our senior notes, and the recognition of early redemption option for the senior notes redeemed. Regarding the working capital management in Page 37, as you can see, we have maintained a relatively stable AR and AP turnover days, but we do see the increase of inventory turnover days by 15 days.

As you may recall, in our interim result announcement, the inventory turnover days of our ANC business ran up to 254 days.

This is because after the daigou in -- especially in the Australia market started to destock the inventory in the first half. Then the sales performance for the end of the market was below our expectations. So therefore, the inventory balance and the turnover days were not. But during the interim result communication, we already indicated that it will take around 12 months for us to bring down this turnover days back to 150 days, the historical level.

So now 6 months later, as you can see, we have managed to bring down to 208 days for ANC business, which is in line with this direction.

So in Page 38, you can see an overall healthy liquidity position for the company. Regarding operating cash flow, we generated close to RMB 2.2 billion. This is, as Laetitia just mentioned, it shows the over 90% cash conversion rate for our EBITDA, thanks to this very high cash flow generation business model we have maintained. And our cash balance for the year-end at RMB 2.2 billion is also higher than last year-end. And also, now we can see for the -- just the past February ending cash balance, we have seen an even higher -- higher cash balance we have maintained.

So regarding the 50% dividend payout we announced last night, this represents 22% of the cash we have. So we see it's quite a reasonable level to utilize our available cash resource.

Page 39 is a very important slide especially during the current -- the virus situation. In this slide, and as you can see on the left-hand side, now we have this 2 new debt instruments after the successful refinancing of our both term loan and senior notes in the second half of 2019. And for the other real senior notes and term loans they have the new maturity of 4 -- 5 years and 4 years, respectively. So therefore, now we have a very stable capital structure without facing any immediate refinancing risk. Plus, we have USD 50 million regarding credit facility available under our syndicated loan structure, which can provide us additional liquidity buffer if we need to use later for other operations.

And also, as you can see in the mid section of this slide, through the 2019, we managed to reduce our finance cost by RMB 60 million. And after the completion of our refinancing, we shall see the further saving of our finance cost in 2020. On the right-hand side of this slide, you can see, we have maintained a quite low net leverage ratio at 1.64x. This level is much lower then over 3x, 4 years ago, shortly after the Swisse acquisition. Just let you know in our syndicated loan, we have the covenant to maintain our net leverage ratio below 4.5x. So 1.64x versus 4.5x, there is a very sufficient headroom.

And likewise, in our syndicated loan, we have another financial covenant -- is to maintain the interest coverage ratio to be at least above 3x and potentially, our actual ratio is well above 5x.

So as you can see, we have very sufficient headroom for our debt covenant compliance.

So also another important point to mention is that you have already seen very significant depreciation of Australian dollars against U.S. dollars during the last 2, 3 months period. So we are very pleased to inform you that the both the FX and interest rate exposures of our term loan and the senior notes have already been fully hedged since the completion of our refinancing last year.

So therefore, we are immune from this recent market volatility. So therefore, if we put all these parts together, we can see our group's balance sheet is very healthy with sufficient cash liquidity. And going forward, we will continue to take a prudent approach to manage our cash and debt positions, so as to support the group's sustainable and profitable growth going forward. Thank you.

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Operator [5]

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Thank you, Jason. We are now ready to take some questions from the audience. (Operator Instructions)

I will now pass it over to Ms. Joy Tsai, Investor Relations Director, to commence the Q&A.

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Questions and Answers

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Joy Tsai, [1]

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Good morning, everyone. So we have got some similar questions from the investors. So I will combine some of them together. So with that questions from all saying (inaudible) from investors moving from Merrill Lynch and (inaudible). So the question is, please provide some update since the COVID-19 has broken out on supply, demand and logistics and areas of key business segments? How does COVID-19 impact our business, especially on your supply from Europe for Interformula and from Australia for supplements? Do we see any disruptions in your supply chain? And are there any measures to deal with the current situation? Under what condition with our manufacturers in these 2 countries have to shut down? And are logistics being stopped? And in the extreme case when that happens, so does the company have any backup or contingency plans? So that questions from the afore investors I mentioned.

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Laetitia Marie Edmee Jehanne E. P. Garnier, Health and Happiness (H&H) International Holdings Limited - CEO & Executive Director [2]

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Thank you, Joy, and thank you all of you for your questions. I will perhaps answer it from a business perspective first, and then I will ask Jason to provide any further financial kind of assurance to investors. And of course, Fei, please free -- feel free to step-up or to add on at any point. Okay. Obviously, this is a critical topic because the world has changed a lot from the beginning of this year. So there are several perspectives in your question. I will try to address them one by one. Well, first of all, as an organization, #1 priority for us is our team and our safety. So what we have done as soon as the COVID-19 rose in China is to adjust our ways of working. So we have kept our teams working from home, and we have ensured that our own facility production capabilities at our premises in China, which is our probiotic factory, kept on working, and we have obtained the authorization from the authorities to keep on producing, which was not an easy task to find enough workers in such an environment, but we have been able to cope with production to keep demand. So our teams are adjusting ways of working, working from home, that was in China first. Now everyone has resumed working. Now obviously, Europe being the core of the pandemic as well as now Australia in storing a lockdown starting from yesterday. Our teams are all working from home. That is from an office perspective. From a manufacturing perspective and logistic perspectives, all of our operations are still operating.

I will come back to supply and suppliers later on. I guess, from an overall business active, the main message is, business is on track. And according to our plans, we haven't seen any major disruption to our business. Of course, we have seen a lot of channel shifts, a lot of change in consumers' behavior and consumers' demand, a lot of online upside, some disruption in our offline business, of course, in China in January and February the baby stores couldn't -- I mean, during the outbreak could not open. So we have taken some measures in a very flexible way, leveraging, for example, our MAMA100 CRM platform to support the baby stores. So in instances where they did not have goods or they could not deliver the goods or consumers could not come to the stores, we have helped them to get their order online with us, and then when they were experiencing low supply or impossibility to deliver, we have helped them to ship directly from our warehouse in Guangzhou to consumers through our collaboration with [Sonfon]. So we have been able to capture some of this demand. Obviously, we have seen the surge of our demand online, which we have tried to capture. I mentioned the ways we've changed the way to good-to-consumer with our online webcasts and online communities. We've really tried to leverage any opportunity to make sure that we capture this growing demand. So from a business perspective, we are so far not seeing any major deviation. I think we can be very grateful to be in categories, such as nutrition and wellness, where the demand is actually very resilient and -- because most of our products are in this first necessity product. If you think about infant formula, even diapers and for supplements, these are not first necessity demand, but everyone understands that under such circumstances, the demand for immunity product particularly is rising. So I cannot say that our beauty from within supplements are performing extremely well at the moment, but that is obviously being balanced by a strong demand in categories like immunity. So to call them vitamin C, Immune, et cetera. So from a total demand perspective, resilient categories, resilient demand.

Now from a supply perspective. Obviously, I mentioned our probiotic operations in China, when the crisis became global and particularly focused on Europe, we have been very quickly talking to our suppliers, first, to ensure safety and health measure at their premises, safety and hygiene measures, should I say, to make sure that they lower as much as possible or eliminate the risk of contamination within their premises. Again, very luckily, dairy companies, supplement industries are considered all around the world by governments as necessity industries, and therefore, the governments, would that be in Italy, in France, now in Australia and when that was the case in China, we have -- our CMs have been given the authorization to continue to produce. So there is business continuity on their end linked to the fact that we are in industries where these are considered as necessity industries. People need to continue to feed themselves, so dairy companies are allowed to produce. And obviously, supplement companies, manufacturers are manufacturing supplements and, of course, medicine. So these are companies that can continue to produce.

Now from a pure sourcing and logistic, there is an -- some obviously, minor impact, and we need to continue to monitor the situation. What I mean here is the ability of our CMs, of our manufacturers to supply all the raw material, all the ingredients, all the packaging material and to be able to get them on time with the right logistics and to ship those products. There are still some question marks here. We, again, so far, are on track, and we haven't seen any major disruption to our supply. Our suppliers are still supplying to us. But I cannot say there is or there will not be any kind of slowness or shortness of resources from a logistic perspective. So there might be some impact going forward, we do not measure it yet. But in any case, to your next question around how the company responds to that, we are obviously first of all, at our end, seeing so far enough safety, inventory of most of our key SKUs, key products to be able to fulfill the market demand for the coming weeks and months. And we're obviously taking measures to build additional safety inventory as quickly as we can in case something happens, as you said, where any of our manufacturers would have to close for any reason. The only reason I could see, again, because of the fact that they are able to produce would be a situation where they would have a contamination in the factory, for example, which we are again proactively trying to prevent, absolutely. If that ever happens, again, the best thing we can do in our instance is to build enough safety inventory at our end and wait until they can solve the situation. But again, until today, everything is on track. I can just not promise there will be no absolute 0 disruption or slowness, but so far, nothing that does impact the business in a material way.

Jason, would you like to perhaps add on either on the inventory side of things? Or also perhaps I'm sure investors are questioning whether we have sufficient cash and what about our cash position situation so that we can give a full picture.

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Yidong Wang, Health and Happiness (H&H) International Holdings Limited - CFO & Executive Director [3]

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Yes, for the inventory as based on other inventory turnover days, so that's for BNC, we have around like 4 months for inventory turnover days to month and for ANC, we have around like 6 months. So therefore, as Laetitia mentioned, right, in case of any kind of supply disruption, we still have this sufficient inventory buffer to ensure the continuous operation for other business. And regarding of cash position, as I just mentioned of our cash back position, now to the other end of the February is even higher than the December ending balance. And plus, we have this USD 50 million revolving credit facilities, which we haven't drawn down yet. So this all can provide us very sufficient cash and liquidity buffer for any kind of operating needs going forward.

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Joy Tsai, [4]

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Okay. The next question is still about COVID-19. So I can find several questions from investors, including (inaudible). So the question is, does the coronavirus effect our expectation of split growth in 2020? On the China domestic channel side, how we are seeing sales recovery since February? Is there any of our products demand benefited from coronavirus? Can you talk about the demand trends of probiotics products and health supplements, especially after the coronavirus outbreak in China?

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Laetitia Marie Edmee Jehanne E. P. Garnier, Health and Happiness (H&H) International Holdings Limited - CEO & Executive Director [5]

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Thank you, Joy. I will take that question. As mentioned earlier, the demand has been strong, particularly with our, we said, necessity products and our products linked to immunity. I think we don't want to overpromise because we need to see how the situation evolves. Of course, there is rising demand for, as I mentioned, products linked to immunity. So vitamin C, for example, immune-related product, multivitamins. But on the other hand, there is also an other non-necessary SKUs, such as beauty category or non-first necessity goods, we don't see the same pattern at the moment. So we need to wait and see how each other balance. But obviously, there is, for us, a great opportunity to recenter most of our efforts and our campaigns and our consumer message towards this immunity opportunity, and that's what we're doing in a very fast and adaptable way with very, very key and very -- very sharp messages to the consumer. So we can see definitely high demand for these products.

You also asked probiotic, children probiotic, we've absolutely seen an increase in demand in the first few months, and we're trying to cope from a supply perspective, again with the strains we import from France and the factory capability in Guangzhou. So we're scaling up our capabilities. So there will definitely be upside in those.

What I can say so far is that our Q1 outlook, the way it looks from now and again, March is not finished, we are -- we're seeing a stable business and on track with our original plans. So no major deviation. As mentioned earlier, there is a shift in channels for sure, online booming, some channels offline not performing that well. But mentioned that January and February in China, for example, baby stores were in a challenging situation. As we stand in March, we clearly see that the baby store channels are -- baby stores are reopening, and we are actually seeing strong momentum as we speak. So it's difficult to give an absolute picture on what the full year will look like. We've obviously tried to capture this rising opportunity of huge immune demand as much as we can within the limits, obviously, of our supply, and our partners and our resources, but definitely an opportunity for us to step up.

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Joy Tsai, [6]

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Okay. And the next question is from (inaudible)

So your question is, after the virus outbreak, consumers in China, where even worldwide may commend a higher health awareness and that higher demand for healthy products. How can we better as model tap into consumers potentially surging demand of nutritional supplements? Does H&H have any concrete market (inaudible), please do share with us. Back in -- the second question is, at the beginning of 2020, H&H has a plan to reaccelerate the channel expansion of IMF products for 2020. So do you still turn to put off this game given this current situation? What is our latest store expansion target in train sets the number of the stores, any number of distributors to be engaged? The third question is, even after 1 year of tightened regulation, it appeared to start with China's online market share dropped slightly, and the market seems to be more fragmented. Can management share your view regarding the online competitive landscape of nutritional supplement later going forward. How can we further retain our share across different online programs?

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Laetitia Marie Edmee Jehanne E. P. Garnier, Health and Happiness (H&H) International Holdings Limited - CEO & Executive Director [7]

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Thank you, Joy. Can I just confirm the last question online market share? Is that for ANC?

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Joy Tsai, [8]

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Yes, that's for Swiss.

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Laetitia Marie Edmee Jehanne E. P. Garnier, Health and Happiness (H&H) International Holdings Limited - CEO & Executive Director [9]

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For Swiss. Okay.

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Joy Tsai, [10]

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For ANC.

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Laetitia Marie Edmee Jehanne E. P. Garnier, Health and Happiness (H&H) International Holdings Limited - CEO & Executive Director [11]

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All right. If that is fine, I will take that question. And again, Jason and Fei please build on at any time. I think, yes, the rising need for health supplements is a reality with the current COVID-19 situation, but I would say it's not just in China, it's a global opportunity for us. And indeed, we have over 70% of our business in China, but we're seeing exactly the same trends all around the countries where we are in the markets, where we are present. So how can we further capture that? Of course, we need to be the brand of choice of consumers. So I tried to talk earlier about the fact that we need to be very sharp in our message to the consumer with the right content and being as much as possible digital. Very -- we have the right product. It's just how we let the consumer know about it and making those available. So of course, with the surge of online, we need to make sure our products are available online in each market where we are. So obviously, Swiss in China is still the #1 brand, and I'll comment on that market share development. So we have an opportunity as the market leader to make sure our products stand up and stand out and that we convey the right message to the consumer. So indeed being more digital, being more consumer centric, being more sharp in our message will be key, and that's something that we are really doing. So also from a channel perspective, putting more emphasis on online is very important. And even in Australia, where we're mostly a retail business, we are seeing very strong demand from domestic consumers on our Swiss website and our online sales, et cetera. So that's also for our team. We need to adapt. We need to stretch our capabilities to adapt to this new reality.

IMF in China and how do we grow? And is COVID-19 changing the picture? I would say, yes, I think online is definitely going to be more and more important. So as mentioned earlier, we have grown our market share online last year. Of course, our ranking hasn't improved. There's still a lot of big players out there, but we are taking steps to strengthen our presence and our performance online in the last few months. This has been quite strong. We need to continue, but baby store will still be important. As we see in March, baby stores are recovering. We are coming back into the race. And our ability as a company within baby store, which is still a massive channel for us, our ability to address more stores to have a larger proposition with more SKU is key. So we will carry on the strategy of launching this new range towards the end of this year and make sure that we are present in more baby stores going forward because this is how we can compete also with the other brands. So we will continue to invest in this channel, it is still critical. At the same time, this year, we definitely need to continue to grow online because we are seeing an acceleration of the online channel, definitely in the baby category as well as the supplement category.

We have had a slight market share drop online yes for Swiss in 2019 online. We're still the #1 player. And again, market share has been fairly saying, slightly dropping, but I would say, overall, quite stable. There's obviously new entrants into this channel, a lot of new brands. So we are seeing a more fragmented landscape, but Swiss is definitely one of the winners of last year online in China. So I wouldn't be too worried about our ability to keep this #1 position. But going forward, of course, we need to capture this immunity opportunity and continue to deploy our full portfolio. And beyond cross-border e-commerce, our next opportunity is the normal trade e-commerce. And for that, we need more products. So we are launching now as we speak more products more blue hats, we're expecting 4 more blue hats now in China. So with more products we can address also the big normal trade online channel, which we have just touched the surface on last year because we had to adjust so many strategies with the change of landscape in the ANC business. So we still focus a lot on cross-border e-commerce. But I think starting from this year, normal trade e-commerce is also a new priority for us.

I just want to check whether Fei or Jason have any other builds on, on these questions. Okay. I think that means I hope I have answered the questions. Joy?

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Joy Tsai, [12]

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Okay. So with that we'll combine several financial-related questions from (inaudible) of the equity side (inaudible) from Pinebridge and (inaudible). So may I know how much base the inventory level are there currently? Should there be any disruption from COVID-19? And what's the company's stats maturity profile right now? And could you please update us with the new interest rate for the senior notes and term loans. How much lower are these compared with the previous one? What is the long-term target less of that? And what's the guidance on short-term sales? And mid-term and estimated impact from COVID-19? And previously our SG&A sales ratio, will this continue rising? And the last question is, will our payout ratio of 50% being maintained, going forward? And also our CapEx plan and will there be any provision for our goodwill on H&H balance sheet?

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Laetitia Marie Edmee Jehanne E. P. Garnier, Health and Happiness (H&H) International Holdings Limited - CEO & Executive Director [13]

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Thank you, Joy. This is a lot of questions. Jason, I think these are for you. Thank you.

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Yidong Wang, Health and Happiness (H&H) International Holdings Limited - CFO & Executive Director [14]

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Okay. Thanks for the question. So I go through Slide 1. First, regarding the inventory level. So as I just mentioned, for BNC, we have the inventory to move around 4 months. And for ANC, we have around 6 months. So we feel comfortable this is adequate level to ensure there's no disruption to offer operation in case of any kind of supply issue. Second is about the debt maturity. So as we just show it at the Page 39. So other senior notes, we have, the maturity will be October 2024. So this is the kind of bullish payment. So there is no amortization in between. So therefore, we have this 5-year kind of tenure.

For term loan, the maturity was November 2023. So it's a tenure of 4 years. We will not have any amortization in the first 3 years. So the amortization will only kick in at the end of the year three. So therefore, those debt instruments are really long-term by nature, which is -- can provide us a very stable capital structure without any immediate refinancing needs or any kind of short-term debt refinancing or the payment pressure.

Third is about the new interest rate. So for other senior notes, the coupon rate is 5.625% versus the previous senior notes is 7.25%. The term loan, the interest rate is LIBOR plus 1.6%, while the previous interest loan, the interest margin is well above LIBOR plus 2% and above. So when we put together, when we look at the savings for the year of 2020, and the interest expense alone, we should see the savings after taking into consideration all the other hedge costs, the savings will be around RMB 60 billion interest expense itself. But of course, on the total finance cost of our group because of the lease for the amortization of the upfront fee and other transaction costs. So we shall see our savings of around RMB 30 billion for total finance cost in 2020 versus 2019.

Firstly, regarding the offer of the sales estimate for the UK and also the third year. So basically, for the year-to-date, the sales development in this virus situation, we can see also sales development has been quite stable. And it's also on track with our plan for the Q1. So for the full year, we aim for the profitable growth of our business. This means, we will strive for the positive growth of our revenue, while maintaining a stable EBITDA margin. And meanwhile, we are now closely monitoring the FX movement and the COGS development, which may put pressure on our gross margin. So we are working as one team together to mitigate -- try to mitigate all this -- the risks and the challenges.

This is regarding the dividend, the payout. So this is also the given policy, we already indicated last year after we started our dividend payout, this is true. So after the completion of the good integration and also successfully managed to bring down of the net leverage ratio to the current level, we feel comfortable that going forward, we will maintain a steady dividend payout. And as long as the cash allows, we will maintain also the current payout ratio and also may increase if the liquidity position allows.

Next is regarding the CapEx. So for the company, we maintain a healthy asset-light business model. So for 2019, we incurred RMB 105 million CapEx, which is in line with our plan. For 2020, we'll continue this asset-light business model. The CapEx will be -- just have a slight increase with about RMB 30 million above the level of the 2019, mainly is for the upgrade of certain manufacturing facilities. In general, this is a very moderate level.

And last question is about the goodwill. And as you know, we have been conducting the goodwill impairment test as part of our annual result audit procedure with our external auditors for this year. So we just successfully passed this impairment test, thanks to the healthy development of the assets, the brands and the business we acquired during the past years. So they are progressing in line with the plan. We don't see any kind of the risk of the editing of major impairment of other goodwill. So hopefully, this answers all your questions related to the financials.

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Joy Tsai, [15]

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Okay. The next few questions is about -- are about our outlook. So first question, could you please talk about gross sales and margin outlook for both ANC and BNC in 2020? Can you talk about our offline expansion strategy, for this in China. And is this gaining traction and how is it different from previous years? Outlook long-term targets of our pediatric products and goat milk infant formula in terms of the contribution of our total revenue. And the second question is, why lead to our market share loss in the specialty stores? And in the super premium segment, what measures are we -- being taking to regain our position? And what is the investment plan into different products, regions or channels for 2020? What will be our strategic focus? And how will we balance the investment for long-term growth versus maintaining healthy margins in the short run? And the final one is, how is the progress of our goat milk infant formula? Is there any growth target or revenue target in 2020 and for the next three years?

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Laetitia Marie Edmee Jehanne E. P. Garnier, Health and Happiness (H&H) International Holdings Limited - CEO & Executive Director [16]

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Thank you, Joy. Again, a lot of questions. I will try my best to not forget any of them and give a clear picture. I think for the ones related to sales and margin outlook as well as how we maintain the investments and the healthy margins, I think Jason has touched upon that when he mentioned that we are aiming at positive profitable growth in 2020 with stable EBITDA margin, but we will have to monitor closely, particularly our gross margin, which might be a little bit under pressure with the current circumstances, both on the FX side of things and also ingredient side of things and supply logistics cost, generally speaking. So we will have to monitor that, and we will monitor that very closely to be able to maintain the current level of our profitability. While, again, same as last year, continue to invest into new markets and new categories because those investments are never one-off. It takes time to build brands. It takes time to build new markets, if we want to, at some point, reach a leading position. So perhaps to answer this question, we will make sure that this does not further dilute our earnings, and that's why Jason mentioned this EBITDA margin that we want and aim to keep stable. But at the same time, in terms of focus and priorities, I spoke about the French market, we want to continue to grow by its time in the French market because it's important for the brand visibility, and it's also a market of choice for us, where we have already gained a #1 position in a particular channel, particular segment, organic IMF, and we believe in the growth of that category.

We want to continue to invest in Southeast Asia expansion and particularly for Swiss. So we just launched in India. We are launching 3 to 4 new markets, 3 markets, sorry, in 2019 -- 2020, I apologize and other countries in 2021. So we need to -- as we enter those markets, we need some upfront investments. These would be, I think, on top of mind -- of my thoughts around market priorities, as we really believe in the potential of Asia as a new growth driver for Swiss in leveraging our leading Australian position and the rising growth of supplement needs, which again, is not just in China, but also global. Of course, new markets, we also mean new market and new initiatives. So we need to continue to invest in China to grow our new categories that Jason had listed on that slide, where we spoke about new initiatives that was Slide 34, where you see how much we invested in new markets. So in 2020, we will continue also in terms of new category to grow Dodie, to grow Good Goût in China to further penetrate those brands and let them -- let consumers know about them, grow their awareness, grow their distribution pattern, and therefore, that also needs investment. Offline expansion for China, Swiss in China, it's actually normal...

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Fei Luo, Health and Happiness (H&H) International Holdings Limited - Chairman of the Board [17]

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(inaudible)

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Laetitia Marie Edmee Jehanne E. P. Garnier, Health and Happiness (H&H) International Holdings Limited - CEO & Executive Director [18]

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Yes, Fei?

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Fei Luo, Health and Happiness (H&H) International Holdings Limited - Chairman of the Board [19]

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Laetitia, how to legitimize that because we report a lot of our new initiative. So the notice of concern, how about to balance the long term and short term, so we can keep the (inaudible) for the new market and new category, we control 10% of the total SG&A expenses.

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Laetitia Marie Edmee Jehanne E. P. Garnier, Health and Happiness (H&H) International Holdings Limited - CEO & Executive Director [20]

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Yes. Thanks for building on that point. You're right. And actually, that is why we think this should not further dilute our current profitability as a business. This is the bottom line. And as we mentioned, the total amount of investment should be kept and controlled within this rule of -- actually this double rule of 10% maximum as well as 3 years profitability for any new markets that we want to achieve. We don't want new markets to lose money for many years. Eventually, we're building profitable business of scale. That is definitely our purpose. Thank you for that.

For Swiss offline expansion, I think we should talk about normal trade expansion, so it's both an offline strategy as well as a normal trade online strategy. And therefore, I spoke earlier about normal trade e-commerce, which is as big as cross-border e-commerce on the online segment. So with more products, as we are planning to have, again, more blue hats and more SKUs in 2020, as the team always refines the NPD, new product development pipeline with more products, we are then able to have a better footprint in normal trade e-commerce with more baby supplements, for example, also beauty from within category and of course, now with this rise of immunity products, more immunity and general wellness products, such as protein powder, vitamin C, multivitamins, et cetera. So we are, for example, currently finding for our multivitamin to be able to get blue hats. We are working on a new protein powder blue hats, fish oil blue hat, et cetera. So we are actively working to make sure that with more blue hats, we can further penetrate, particularly the pharmacy channel, which is our #1 channel offline and also be able online to address more consumers because when you have blue hats, you're also able to make more claims. So we are confident that we will continue to drive growth in this normal trade channel while continuing to maintain that leading position on cross-border e-commerce.

There is a question on our goat milk infant formula in terms of contribution to total revenue. We don't have a particular guidance, but definitely, it will be one of the main growth drivers because first, this goat infant formula is positioned in the super premium segment, which is the fastest growing segment, and we see from the performance of some of our competitor in the goat infant formula that there is a high demand and high growth to capture. Actually, the goat infant formula is not captured in the Nielsen market share data, it's outside of it because the Nielsen data only captures the cow infant formula. And therefore, this is additional market share that we can gain that will not be captured in the statistics. And we are aiming, obviously, for a broader distribution. So our target by the end of 2020 is to be present in around 15,000 points of sales. And we still have a certain way to go because we just launched in December. We took preorders in November, launched in December, and then we had the COVID-19 outbreak in between, which has kind of slowed down, obviously, our distribution footprint that we are now reaccelerating that. And we're seeing very good response from consumer because we're leveraging the Biostime brand, our distribution and baby store network. So we do definitely have a strong opportunity in that category.

Why is our baby store market share dropping? I mentioned earlier, actually, again, it is a slight drop. It's not a massive drop. We are maintaining our ranking. And you might obviously know that there are some strong players, particularly domestic players without mentioning names that have had a very strong push in 2019, particularly on the baby store channel. So I think actually our market share compared to some of our competitors and particularly international top brands is quite resilient and has resisted quite well. Obviously, we need to be working very strategically with the key baby chain stores that are consolidating at the moment. We need to make sure we keep on the good work we're doing on new customer, new consumer acquisition and getting that work done more digitally now that consumers are just really living online, as we speak. So we are doing that now, and we're seeing very good results of our, what we call our webcast plus online communities, (inaudible) initiative over the last few weeks post COVID-19 outbreak. Consumers are responding really well to our content.

And that conversion to sales through the baby store channel is actually quite promising. So I think through this kind of digital shift to touch on the new parents online, plus this new series that will help us to be able to get broader distribution as well as a focus on our premium -- super-premium product offering, I think we have a chance, obviously, to continue to maintain our position in the baby store and not to see this market share dropping. And obviously, I think, eventually, it's all a matter of balance between online and offline. So we have to be able to healthy grow on all these channels. We don't want one channel to come and cannibalize the other. So we'll make sure we continue to prioritize the baby store channel, while online, obviously, is becoming a new and very strategic priority for us as a brand and as a group. Did I answer all the questions, Joy?

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Joy Tsai, [21]

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Yes, you did.

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Laetitia Marie Edmee Jehanne E. P. Garnier, Health and Happiness (H&H) International Holdings Limited - CEO & Executive Director [22]

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Okay. Thank you.

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Joy Tsai, [23]

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So the next question said is for Jason again. So (inaudible) from the (inaudible). They asked about some financial questions. So the first is shall we expect substantial decrease in financial cost, given your early redemption and lower -- and one-off transaction costs in 2020? And the second question is, as the company is not deviated from original target, can management share the original targets and any guidance on top line growth and EBITDA margin this year? Given current global interest environment, any plan for us to do another refinancing?

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Yidong Wang, Health and Happiness (H&H) International Holdings Limited - CFO & Executive Director [24]

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Okay. Okay. Regarding the first question, as I just mentioned, since the interest margin for both offered new senior notes and term loan are better than the previous ones. So therefore, in 2020, we should see -- for the interest expenses themselves, we should see the saving of around RMB 60 million. But just to remind you, for the refinancing exercise, we also incurred the (inaudible) and the transaction cost, which will be capitalized and amortized throughout the life of the debt instruments. So therefore, we should also see this amortization impact in our finance cost.

So when you put all this cost impact together for the finance cost in our P&L, we shall see in the 2020, a saving around RMB 30 million, which, of course, also helps to improve our net profit this year and going forward. Second is regarding the -- our results and versus the original target, right, that -- so then basically, as you recall, right? What we indicated 1 year ago, and then if you look at the other actual results of BNC and ANC, actually, the BNC, the development is well in line with what we indicated 1 year ago. But for the ANC, as we all know, due to this daigou destocking impact, the growth indeed is below our expectation.

And going forward, I just want to emphasize again, as I just mentioned, then for the whole group, we target the profitable growth of the business, which meets the positive growth of the revenue, that on a total basis, on a full year basis as well and while maintaining the overall stable EBITDA margin.

But of course, right now, it's also mentioned by the Laetitia just now, we do face certain gross margin pressure due to the current FX volatility and the COGS development. So it also the management's focus right now to try to mitigate that impact.

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Joy Tsai, [25]

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Okay. Due to the time constraint, we will take the final question. This is a question from (inaudible) Investments. So can you talk about stated set margin of organic products and our (inaudible), the thing to have caused gross margin deleverage, even at low revenue mix. What kind of investment is needed to greatly scale up the online presence going into the full global outbreak? Can we expect low S&D ratios this year given 2 new product launches?

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Laetitia Marie Edmee Jehanne E. P. Garnier, Health and Happiness (H&H) International Holdings Limited - CEO & Executive Director [26]

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Thank you. Joy. Jason, would you like to take this question?

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Yidong Wang, Health and Happiness (H&H) International Holdings Limited - CFO & Executive Director [27]

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Yes. As I just mentioned, right, the -- our goat milk IMF product and organic IMF product have the gross margin lower than the -- our Biostime branded normal series. So definitely, this is also the management's focus. Also I just mentioned that we will try to improve our gross margin for all these -- the categories. And regarding the S&D ratio. So again, just now we mentioned, right, that we were maintaining a stable EBITDA margin. So therefore, definitely, the S&D -- the control will be a key part for us to maintain this stable EBITDA margin. So this is why, the both Laetitia and Fei just emphasized just now. It is very critical for us to ensure this financial discipline that the investment of S&D into the new markets and new categories will not exceed 10% of the total S&D expenses of the group.

So with this kind of strict finance discipline, then we can hope to maintain a stable EBITDA margin.

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Joy Tsai, [28]

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Okay. I think that's all the questions we have. So thank you, everyone, for joining us this morning. Please stay healthy and safe.

And I now announce the end of today's presentation and webcast. If you have any further questions, please do not hesitate to contact our Investor Relations team. Goodbye.