Welcome, everyone, to the FY 2024 half-year Results presentation. My name's Nigel Greenwood, CFO. Online attendees can submit a written question at any time by clicking the "Ask a Question" button on your screen during the presentation. Your questions will be answered at the end of the presentation. I will now hand over to David Banfield, CEO.
[Foreign language]. Good morning, ladies, gentlemen, fellow shareholders. Welcome to the FY 2024 interim Results. This presentation will share background on the recent trading updates we've given, share actions we've taken, and give an outlook FY 2024 and then beyond FY 2025 and out to 2030. After three and a half years of top and bottom-line delivery, we're determined to return to growth. The team and I are doing everything possible to deliver in the short term but also prepare for the exciting future that we see ahead of ourselves. Most of you on this call will be familiar with our recent market update from the 1st of February and our change to guidance. I want to start there as this will be forefront of everyone's minds. Today's interim result is in line with our announcement of the 1st of February.
Guidance changes for H2 factor in lower consumer spending in China and the loss of some distribution with one customer in North America. We see early signs of improvement in China during Q2, and that's continued into January. We signed additional distribution agreements in North America that will come online in the second half FY 2024. our market share remains strong. We're a market leader in five out of six of our key markets, and we've strategically maintained pricing to preserve our 60% gross margin. Management remains committed to FY 2025 business plan and our NZD 50 million EBITDA target subject to normalization of consumer demand. Since 2019, we've built a platform for growth in supply, in brand with our team, and expansion of our manufacturing capability to be able to deliver our 2030 performance.
We understand, and we really want to help you understand, what the assumptions are to get to the guidance that we've shared. So today, we've gone into much more detail than we normally would. You can find detailed guidance bridges for both revenue and EBITDA later in the pack, and I'll come back to those once we've gone through the financial results for the half year. In mainland China, half one revenue was NZD 33 million, down by 19% on PCP. This was primarily driven by the macroeconomic weakness impacting the premium consumer category. Sales in China are showing improvement towards a more stable trading pattern. In North America, half one revenue was NZD 13 million, down 37% on the PCP. North American sales were impacted by the loss of some distribution with one customer, inflationary pressure, and a strong PCP.
Since Christmas, we've signed new additional agreements with around 700 stores coming online in H2. In the Rest of Asia, our revenue improved by 49%, or NZD 6.3 million-NZD 19.2 million, driven by strong growth in Korea and Singapore. We've continued to invest in marketing to raise awareness of the Comvita brand and ensure we capitalize on the growth opportunities we see ahead of us. In ANZ, revenue improved by NZD 1.2 million, or 7% to NZD 19.3 million. For FY 2024, we're expecting full-year revenue to be between NZD 225 million-NZD 235 million, and reported EBITDA, excluding our ERP costs, to be between NZD 30 million-NZD 35 million. In addition, we're forecasting a reduction in net debt due to positive operating cash flow. We understand and are extremely focused on our number one market, China.
Some things we can't control, but some things we can and are taking and implementing proactive initiatives. Our estimates that we share and are reflected in our guidance are realistic, not heroic. In the chart, you can see our quarterly performance through quarter one and quarter two going back to 2019. I draw your eye FY 2024. as you can see, Q1 was materially down, but Q2 was in line FY 2022 and the second highest quarter. The only year that was higher FY 2023, where we experienced exceptional demand as the lockdown in China finished and demand boomed. Our business model we shared with you back in 2020 is designed to achieve 60% gross margin, 15% marketing to sales, and 20% EBITDA margin.
Below, you can see the improvements that we've made since FY 2019 to GP, the investment we've made in marketing, and how that's flowed through to EBITDA after ERP. Starting at gross profit, you can see in FY 2019, our GP was 37%. This has now been 60% through 2022, 2023, and it's forecast in 2024. We've increased brand investment from 7% in 2019 to 12% in FY 2024. You can see our EBITDA after ERP growing from break-even back in 2019 to 14% that we're forecasting in FY 2024. I'll now go into more detail on the financials for this period. Our interim revenue was NZD 103.4 million, minus 7.8% versus PCP. HoneyWorld revenue was NZD 6.8 million, or NZD 5.4 million increase on a like-for-like basis. We delivered a 60% GP in line with our plan, and we invested NZD 14 million in marketing.
We continue our investment in ERP and transformation, and in the half, this was NZD 4.4 million. Our EBITDA after ERP was NZD 9.5 million, minus 32% versus PCP. We decreased our inventory by NZD 2.4 million, though recognize it remains at elevated levels. Our net debt was NZD 85.8 million and increased by 35%, but with significant investment into HoneyWorld and Apiter. Our operating cash flow was negative NZD 6.1 million, but was improved by NZD 12.5 million versus the PCP.
The directors declared an interim dividend of NZD 0.01 per share to be paid in April. In coming to the decision, we took into account our half one performance and the challenges that we faced, our net debt, and our positive outlook FY 2024 and beyond. We wanted to balance shareholder distribution with prudent capital management. I'll now hand over to Nigel, who will talk to our P&L balance sheet, cash flow, and inventory. Over to Nigel.
For the financial slides, I will focus on key points not already covered by David. Our GP was 60.2%. While it was down on PCP due to one-off gains not repeated this half, our direct margin was up 1.4% on PCP. The increase in sales variable expenses was caused mainly by HoneyWorld, and our EBITDA for the half was impacted by NZD 1.2 million of FX losses in December, which was substantially unrealized and unwound in January. Net debt finished the half at NZD 85.8 million.
This included our investments in HoneyWorld and Apiter, which combined totaled NZD 9.8 million. Inventory: Inventory at NZD 143 million remains elevated. However, it was down NZD 2.4 million on PCP. Positively, we reduced our raw material inventory by NZD 20 million versus PCP due to the unwinding of previously long-term supply agreements and only purchasing honey as required. Finished goods inventory did increase due to forecast demand not materializing.
We expect inventory to reduce by at least NZD 7 million in H2. Operating cash flow improved by NZD 12.5 million on the same period last year. The NZD 17 million of investing activities included the acquisition of HoneyWorld at NZD 7.3 million, increased investment in Apiter at NZD 2.5 million, and capex of NZD 5.6 million. As already stated, the board declared a one-cent-per-share dividend. The board will review the full dividend in August. We will complete our ERP implementation by the end of FY 2024. The FY 2024 spend is forecast at NZD 7 million and remains on budget. The benefits will be increased organizational efficiency, circa 20,000 hours of saved per annum, and have a scalable, future-proof solution. I'll now hand back to David.
Thank you, Nigel. We're maintaining or growing share in our key markets, and I'll now share some of the performance through those segments. As I shared earlier, our total revenue was down NZD 8.8 million, or 7.8% versus the PCP. Our Greater China revenue was impacted by those broader economic challenges and subdued consumer spending. Greater China revenue was down by NZD 6.9 million, or 13.3%, and our contribution dropped in line with sales. Mainland China revenue was NZD 33 million, -19% versus PCP. Our U.S. revenue dropped by NZD 7.7 million, or 37.1%, and was impacted by that slowdown in consumer spending and a loss of some distribution with one major customer. Our contribution dropped in line with sales. We saw strong growth in Rest of Asia and good growth in A N Z.
Rest of Asia segment grew by 48.7%, or NZD 6.3 million, and ANZ by NZD 1.2 million, or 6.5%. From the start within our strategic plan, we shared our ambition for e-commerce to be 50% of our total revenue. During this period, e-commerce increased to 40% of our total revenue, plus 120 basis points, and I'll come back to that a bit later on. As I've shared before, HoneyWorld revenue of NZD 6.8 million was in line with our plan and + 5% versus PCP on a like-for-like basis.
I'll now move into the detailed market segment pages. Greater China is our biggest segment, and mainland China, our biggest territory. Revenue was down by 13.3%, or NZD 6.9 million, in the first six months trading. Mainland China revenue drop was mainly impacted by macroeconomic challenges. In Hong Kong, we showed single-digit revenue growth. In both territories, our market share remained strong.
Our gross profit was minus 320 basis points due to product mix and other cost of sales decline year on year that Nigel talked about earlier. Net contribution decreased to NZD 8.5 million in line with the sales decline. On this page, we share with you our compound annual growth between FY 2019, FY 2024, and what we need to achieve to get to our midpoint revenue for the full year. Here you can see, in half one, revenue was down by 13.3% versus PCP. For half two, we're forecasting revenue to be down between 5%-10% versus PCP, meaning that the full year will be down between 7.5%-11.5% versus PCP. Moving on to North America, we'd always forecast North America to have a weak half one and a flat full year.
As you can see, we've delivered a revenue of NZD 13 million, -NZD 7.7 million, or 37% versus PCP. Our half one revenue decreased due to loss of distribution in one customer, half one strength in the PCP, and the impact of inflation on discretionary spend. Our GP was - 100 basis points due to other cost of sales, again, that I mentioned earlier. Net contribution of NZD 2.3 million is down by 67% in line with sales decline. Again, following the same approach that we took with China. At the top, you can see our compound annual growth that we've delivered FY 2024, and what we need to deliver to hit FY 2024 full year number. Half one revenue was down 37%.
Half two is forecast to be down by 10%-15%, primarily due to e-commerce strength and the new customers that we talked about earlier coming online. Our FY 2024 forecast revenue is therefore to be down 25%-30% versus PCP. The successful acquisition of HoneyWorld means that Rest of Asia is on track to become our second largest segment. In this half, we grew revenue to NZD 19.2 million, an increase of NZD 6.3 million versus PCP. We continue to invest in brand and in our team to capitalize on the growth opportunity. Our net contribution was NZD 2.6 million, down 21.5% due to brand investment for growth and integration costs. Again, you can see here our performance from FY 2019 to FY 2024 and the compound growth that we would need to hit FY 2024 full year target. Half one revenue was up just under 50%.
Half two revenue forecast is between 32%-38%, meaning the full year revenue forecast is between 40%-45% versus PCP. We're on track for this to become our second biggest segment. Revenue in Australia and New Zealand increased by 6.5% to NZD 19.3 million in this period. This was despite the slowdown in China and its impact on the Asian health segment in Australia and New Zealand. Our gross profit was down 110 basis points due to the mix of Asian health, and our net contribution for the segment was down NZD 110,000, or 1.7% as we continue to invest for second-half growth opportunities. Again, on the page in front of me, you can see in front of you, you can see that for the period FY 2024, we delivered a negative compound growth rate of 8.2%. Our half one revenue was +6.5% versus PCP.
We're forecasting H2 between 7.5%-12.5% with the activity that we've got underway. That would mean for the full year, revenue would be up between 6%-11% versus PCP. You can also see our new shop-in-shop, which is a version of our wellness lab that has been implemented in Auckland Airport on the left. Finally, EMEA. EMEA revenue was NZD 2.2 million, -NZD 370,000 versus PCP. The segment remains subscale, with the Middle East being recognized as a key area for growth. Our direct margin improved by 1,000 basis points due to digital share of total, new distribution in both Middle East and U.K. Net contribution was down by NZD 43,000. As I shared earlier, e-commerce is designed to be 50%, or forecast to be 50% of our business by FY 2025.
In this period, e-commerce accounted for 40% of our total revenue, plus 120 basis points versus the PCP. Our email database grew by 7%, our registered users grew by 47%, and our conversion rate also improved. Encouragingly, more people who registered then came back to buy again, and you can see our repeat purchase rate up by 1,300 basis points, and our champion users, multiple users, brand advocates, up by 585%. In the U.S., e-commerce revenue grew by 8%, and our Amazon business grew by 162%. Now moving on to guidance. our FY 2024 forecast reflects weaker consumer spending with some improvement on the half year in the second half. We're forecasting revenue of between NZD 225 million and NZD 235 million.
We're forecasting gross profit of at least 60%, EBITDA between NZD 30 million and NZD 35 million, excluding ERP costs, a reduction in net debt due to positive operating cash flow, and a reduction in inventory versus PCP. Our business model all hangs off our 60% GP, and we believe we're still on target to deliver NZD 50 million, subject to normal consumer demand reappearing. On this page, you can see our revenue bridge from our half one result FY 2024 to our forecast in half two and our full year forecast. To walk you through the page, you can see in half one in Greater China, we delivered NZD 45 million, which was -13.3% versus PCP. The midpoint of our half two guidance is NZD 53 million, -5.7% versus PCP, meaning our full year is just under NZD 99 million, or around -10% versus PCP.
Again, in all of the segments, we've tried to make sure that the figures aren't heroic. They're realistic assessment of our performance and the improvement that we're seeing in the numbers. In North America, sales in half two are expected to be substantially in line with half one. In Rest of Asia, half two sales include HoneyWorld sales of circa NZD 7 million. ANZ assumes further growth in both domestic and in our Asian health channel, and the increase in EMEA reflects new customers secured in the U.K. and the Middle East, where initial stockfill and ongoing sales will occur in H2. Nigel will now talk to our earnings bridge from half FY 2024 to our full year forecast. Over to you, Nigel.
Thanks, David. Here we show the bridge to our midpoint EBITDA guidance of NZD 32.5 million. Gross profit assumes we maintain our H1 GP percentage at 60.2%. Marketing and sales expenses are managed to 24% of sales, and other net costs, excluding ERP, will be in line with half one. I now hand back to David.
Thanks, Nigel. Our business model hangs off our delivery of our 60% GP. We showed earlier how we've grown margin to 60% and have consistently delivered 60% GP over the last 3 years. Despite the challenges, this year we're still forecasting our second highest revenue ever and our third highest earnings ever. This is all built off a plan we first shared back in 2020. We're in year four of a five-year strategic plan, and we have built a strong platform for long-term growth. We are a purpose-led organization. Our purpose: working in harmony with bees and nature to heal and protect the world, and our determination to leave the world in a better place captured in our Harmony Plan that is so recognised around the world.
We aim to be a world leader in ESG, and we were proud to become B Corp registered back in July of this year. Our focus and progress to 2025. On the left, you can see Arutahi, or our focus, puts the consumer at the heart of everything that we do. On the top right, you can see our unique business model that differentiates us versus every other brand as we have our own people in market, close to customer, close to consumer, and faster to act. We see our three-point plan to stabilize, transform, and build long-term resilience and growth on the bottom left, and the stages of organization development that reflects the improvements that we've made to build a better business at Comvita. Our business model is proving successful. On this page from 2020 to 2022, you can see the market share in key territories.
We lead in five out of the six of our key markets. Hong Kong, we've grown our share from just under or just over 55%- 75%, and we are market leader. In mainland China, we've grown our share to 60%, and we are market leader. Korea, also to 60% and our market leader. Rest of Asia, now to 25%, and again, we're market leader. And the same thing happens in ANZ, where we've grown our share to 46% and are market leader. In North America, we've grown our share from 21% to 25%. We are top two or three brand in the market. And if you look at MULO sales, which is natural and multiple outlet sales, so grocery sales, we're the fastest growing brand in North America.
We believe the future is about further premiumization of our product offering and the way we turn up in markets around the world. Here, you can see a selection of the incredible presentation that we have in markets. Premiumization with quality alongside it will continue to enable Comvita to extend share. As a high-quality premium brand, we are proud to be a reference point in places like Times Square, New York Fashion Week, and at local events where we share the magic of Comvita and our products at things like the Auckland Marathon. Premium brand partners around the world are turning to Comvita as their partner of choice. Here, you see the high tea at the Grand Hyatt in Korea, ice skating or snow, sorry, with collaboration with Snow 51 in China.
We have numerous other examples across hotel restaurants and other premium brands who want to be associated with Comvita. We believe the future of retail is experiential. Back in 2021, we launched our wellness lab here in Auckland in Quay Street . We always believed that this would be a model that we would then roll out. Naturally, COVID came along at that time. So we're really pleased to now have our shop-in-shop active in Auckland Airport, and that you can see and I mentioned earlier on the bottom right-hand side. Furthermore, we've built pop-up stores. This one's in Wuxi in China. We've developed a virtual wellness lab, enabling us to take the magic of the hive and share the Comvita difference with consumers around the world.
On this page, you can see how revenue, margin, and earnings after ERP are forecast or have been delivered and are forecast to grow over the period. You can see our revenue has grown at a compound growth rate of 6.1% from NZD 170 million in 2019 to 2030, which is the midpoint of our guidance FY 2024. as I shared earlier, our gross margin has grown to 60%, or from NZD 64 million back in 2019 to NZD 138 million forecast FY 2024. our EBITDA, excluding our ERP costs, has grown from break-even back in 2019 to the forecast midpoint of NZD 32.5 million FY 2024. we have made significant investment already to build a platform for growth. On this page, you can see the investment that we've put into product and supply, into process improvement, and into customer and marketing.
I point out probably two or three key elements that you can see: NZD 31 million of investment in Forest. You can see our NZD 10.5 million investment in ERP and our investment in retail and expo excellence. Our platform for growth that we've built has seen us invest more in our brand, growing from NZD 11 million in FY 2019 to NZD 31 million FY 2023. we have entered new markets to prepare for growth opportunities in front of us, from nine markets in FY 2019 to 13 markets FY 2023. in terms of our retail and expo excellence, we've invested NZD 3.8 million and, as I shared earlier, NZD 31 million in Forests through this period. We believe there's an incredibly exciting future ahead for Comvita. The total addressable market today of $9 billion is forecast to increase to $14 billion, or 55% by 2030.
Our current category household penetration of less than 1%, we believe that we can grow that to 3% over this period, in line with the 3.5% that we already have in Hong Kong. We know that when we're able to communicate directly with consumers, we're able to significantly grow lifetime value. And so far, we've been able to deliver an increase in lifetime value of over 300%. We're forecasting price growth through the year and a return to normal performance, underlying performance, with China market growing by 17% versus a 17% compound annual growth. One of the things that we're really delighted about is that yesterday at Parliament, there was the launch of the Apiculture Strategy. I'll now share a couple of highlights of that strategy, and we're delighted to support it.
The goal is to double New Zealand's honey export value and increase consumer engagement with Mānuka honey and New Zealand and increase New Zealand's reputation around the world. We are the biggest exporter of honey in the world. The pillars are about sustainability, quality, and customer focus. The enablers for us are about having a strong industry voice, sustainable reinvestment model, mandatory regulatory framework, and a unique and differentiated New Zealand honey story with Mānuka recognized as a taonga species from Aotearoa. All of these elements play into the strengths of Comvita, and we're delighted to support the strategy. As I shared earlier, supply security with the growth opportunity in front of us is of significant importance.
We shared our supply model that through our forest, we'd be able to deliver a 40% higher yield per hive, a 60% higher quality of yield per hive, and a 20% reduction in cost per hive. We are really encouraged by the performance that we're seeing and believe that this really sets us up to grow our current margin from 60%-65% by 2030. This, in turn, will allow us to reinvest more in growth. We have the highest standards for Mānuka honey. We have 23 independent certifications and accreditations. We have 13 global research partnerships, and we have an international advisory board that I'll come back to. We also have the most tested Mānuka honey in the world with 34 tests on every batch and, in FY 2023, 500,000 test results in our accredited laboratory on site in Paengaroa.
Science and IP is at the heart of the Comvita promise. We invest more in science than the rest of the industry combined. FY 2024, we've had a further two patents granted. In total, we now have 44 separate patents granted. We've invested an additional NZD 1.7 million in science and research and so far undertaken 112,000 testing results. We've drawn together a global science advisory board of the world's leading gastroenterologists and digestive health researchers from Australia, from New Zealand, from the U.K., and from our two focus growth markets of China and North America. They bring unrivaled expertise to help us as we go forward in our clinical research. Recently, we shared our discovery of a unique molecule, Lepteridine, in Mānuka honey. This molecule is unique, as I say, and is protected for Comvita with a number of patent families protecting the invention.
The clinical trial that we've just finished is a NZD 1.5 million or just under NZD 1.5 million investment over two years to create a proprietary treatment for gut health unique to Comvita. The study was completed in December. Sample testing and data analysis is ongoing. The primary endpoint results will be presented at Foodomics in Auckland in March. The final analysis and results are expected at the end of FY 2024 but have proven has the potential to enable Comvita to make efficacy claims for Manuka honey. We also have additional clinical trials taking place on cardiometabolic health, immunity, atopic dermatitis, and antimicrobial resistance. As I shared earlier, we're determined to leave the world in a better place as we become more successful commercially. I'll now share some of the details about our team and the impact that we're having.
There are 595 people in New Zealand in the Comvita team with about 400 outside New Zealand. 91% of the team are shareholders, and we're delighted to see our net promoter score with the team improve to +24 during this period. As I said, we aim to be a world leader in ESG. We're currently preparing for our climate reported disclosures, but everything is built off our Harmony Plan and ultimately about strengthening our global hive and making sure that as we grow, we grow with sustainability and impact or focus across environmental, social, and governance. We believe that everyone has the right to return home safe and well at the end of every day. We're pleased with the improvement that we've made in total recordable injury frequency rate, lost time injury frequency rate, near-miss or proactive reporting, and an improvement in our safety culture.
We have seen a slight negative in our motor vehicle injury frequency rate, and that is under the spotlight for us now. Within FY 2025 strategic plan, we shared our intent to be carbon FY 2025 and net positive FY 2030. Here, you can see our net greenhouse gas position at Scope 1, Scope 2, and major Scope 3 at the half-year. You can see our carbon emissions reduced by 59%, our net carbon emissions reduced by 59% to 3,800 tonnes of CO2, something we're proud of but on track to our carbon neutral aim. So, in summary, I'd like to thank you for your time today. As I said earlier, we believe there's an incredibly exciting future at Comvita and in our category. We have a 55% increase in the total addressable market.
We have an opportunity to deliver a significant increase in household penetration, also to increase brand loyalty through e-commerce connection and producing products and services that meet individual consumer needs. We believe we'll be able to get back to an underlying strong growth in China of 17% during this period. All these factors together underpin our confidence in the future market opportunity and consumer demand. So, in summary, we recognize we've had a challenging first half. Our second-half estimates reflect recent trading conditions and prudent cost management. We see early signs of improvement in China that continued into January and additional North American distribution agreements coming into force. Our market share is robust, and our 60% has been retained. We are committed to FY 2025 strategic plan of circa NZD 50 million of EBITDA and our 60/15/20 business model subject to consumer demand normalizing.
The platform is already built to capitalize on the large and growing global opportunity. We thank you for your support, and we look forward to returning the business to growth both top and bottom line as we go forward. [Kira].
We are now ready for any questions. Online attendees, please click the Ask a Question box to send in your questions. Hello. We already have a number of questions that have been asked, and so I will start with those and either answer them myself or hand over to David depending on the nature of the question. The first question we have is from Josh Dale, and I'll hand this to David. Revenue in North America was down 37% in H1 but is expected to be down only 14% in H2. Why the improvement?
Hi, Josh. Thanks for the question. Look, the revenue we're forecasting in H2 is actually materially aligned to H1. So you'll appreciate that in H1 we delivered around NZD 13 million, and we'll be just slightly below that in H2. And we'd previously pointed to the strong PCP that we had in the prior period.
Next question also from Josh. Could you please elaborate on the change in accounting treatment related to the Apiary division's contribution? I'll take that one. In our Apiary division, since 2019 through to 2023, we effectively valued our honey that we bought into inventory at a price list that had been unchanged over that period. In this financial year, we have reviewed that price list and reduced the prices down so that we can save cash by paying lower prices to our landowners and also bring our inventory in at a lower average cost.
So the benefit of this approach is that we will be able to generate lower cost of sales in future periods and improve our gross profit percentage. Next question from Christian. Can you please elaborate on your growth assumptions for the Rest of Asia? So in H2, we've assumed NZD 7 million for HoneyWorld, so that would effectively mean a further NZD 7 million coming from elsewhere. Over to David.
Hi, Christian. Maybe first I'll just be clear about slide 22. So we talked about the H2 forecast being up 32%-38% versus PCP. So in the PCP in the Rest of Asia segment, you can see our revenue was NZD 19.2 million. So the actual growth that we're expecting is primarily through HoneyWorld in this period.
Also from Christian. ANZ H1 growth was 7%, so please explain why there was an acceleration to 15% in H2.
Let me clarify first. So if you go to slide 24, Christian, you'll see our H1 revenue, as you say, was up 6.5%-7%. Our H2 forecast is up between 7.5%-12.5%, meaning our full year will be up between 5%-10%. So again, really in line with underlying performance that we're delivering.
And another one related to revenue in H2. EMEA, who are the new contracts with, and so is the full $3 million of growth locked in?
As we shared in the deck, the main areas of growth are in the Middle East. About $1.5 million of the $3 million is already orders in-house, and we have good faith or good confidence that the rest will come in in line with sell-through.
Question from Josh Dale. You talk about Comvita's FY 2030 ambition but don't elaborate on it. Could you please provide some more detail?
Thanks for that, Josh. Look, what we really wanted to do today was just share a view of some elements of the outlook to 2030. As you know from before, when we look at 2030, we look at global megatrends, we look at strategic beliefs that we have as an organization, and we look at the impacts that are going to come both geopolitically, nationally, around the world. We've taken a great deal to look at those external impacts, and then we look at how things like forest development will improve our gross margin and our overall business model going forward, where we see the opportunity for higher margin, higher reinvestment to accelerate growth further on the platform that we've already built.
Another one from Josh. Can you please provide an update on the Caravan JV?
Yep, we can. So we are still planning to launch a skincare range late in this calendar year.
One from Christian. It's a long question, so I'll look to paraphrase it. Effectively, Christian's wanting to understand more about our NZD 8 million cost out on H2. It appears you're bringing actual market investment for H2 close to zero as a percentage of sales, selling and distribution average 24%. And I think, look, basically, the question goes on that fashion. I'll respond to that and provide some clarification. In H1, our marketing and sales variable costs were NZD 27.5 million. It's set out on slide nine of the investor presentation. That represented 26.5% of our sales in H1. In H2, we're looking to increase our sales and marketing expenses to NZD 30.7 million.
That, however, does reflect a lower percentage of sales at 24%, and as indicated on the slide, that's because we will be managing those to that number. So I hope that provides more clarity on that particular point. Another question from Christian. Why is H2 sales assumed to be flat in North America if you have signed an agreement with 700 stores? That is only replacing one customer in one state.
Look, the reality, we felt that, as we say, we wanted realistic assessments of our second half. As we've already shared, our second-half forecast that we share here is in line with our first-half performance. We know that two of the store groups that we bring online will only be in April, so we get a full year's benefit from April onwards. So again, it's prudence to do it this way.
A question from Tony Morgan. Previously, you have stated that debt was above optimal. It is even higher than then. Are you looking at a capital raise to reset, or are you 100% committed to lower debt through earnings and reduction in inventory?
Thanks for the question. Yeah, absolutely committed to reduction in debt through positive operating cash flow and performance. And we have a clear line of sight, and we delivered strong positive operating cash flow in H2 last year. That will continue through this year, and that's why we're able to say we expect that operating cash flow, net debt reduction, and inventory reduction.
Question from Christian again. Can you please tell us FY 2025 revenues would need to be in China and the U.S. to achieve FY 2025 target?
Christian, look, we haven't shared that yet. What we've done is we've got a number of ranges across multiple revenues FY 2025 delivery, and we believe those are achievable FY 2025, as I say, once demand normalizes, particularly in our main market of China.
Also from Christian. Why are you expecting only NZD 7 million reductions of inventory in H2 when you're expecting an additional NZD 30 million of sales? And can you explain why that's not reducing faster?
Look, I think we put a line in the sand to say that's the minimum reduction we expect to deliver. We actually expect a larger reduction. The majority of inventory coming in in H2 is from our own Apiary, as Nigel explained earlier. So we still don't know the absolute quantum of that, but that's the vast majority of purchases in H2.
Also from Christian. Is there a margin included in the value of inventory, and what is the mix by UMF grade? That's one I can probably take. No, Christian, there is no margin included within the value of raw honey inventory on hand. I can absolutely confirm that. In terms of the mix by UMF grade, we actually don't disclose that level of detail regarding UMF. I think the positive signal that you can take is that we have reduced our raw honey inventory by NZD 20 million since December last year.
Next question from Mark Topi. Can you explain or can you comment on your read of the China consumer that supports your expected H2 improvement versus what appears to be still current subdued economic environment? Could you also comment on the training around Chinese New Year and whether this showed some positive momentum regarding consumer spending?
Yep. Thanks for that, Mark. Look, as we shared in the deck, Q1 of this year was down 26%. Q2 was down by 15%. We've seen the continuation of that trend into January with our year-on-year decline decreasing. So that gives us a sense that in line with our expectations, we're not expecting to get back to growth this year, but in our forecasts, you can see that we're forecasting H2 to be down between 5%-10%.
In terms of right up-to-date with Chinese New Year, there was a BBC news report this morning that talked about record internal consumption of goods in this period. So as I say, we're positive about the result that we've just delivered in January and encouraged by the BBC report and feedback that we're getting direct from our team in market.
From Christian. Market share uplift is significantly higher than Comvita's revenue growth. Can you please explain why you don't believe that there is a structural decline in the total market and what makes you confident that you can lift volumes by a significant amount to meet FY 2025 target?
Yes. Again, thanks, Christian. Look, when we consider the total addressable market globally, obviously, we start and look at the honey market in its entirety. We understand current household penetration and how dynamics in that market are developing. When we come back to the Mānuka honey market, we have reference points that Hong Kong is a great reference point for us where, as you've seen within this update, we're delivering single-digit growth in this period. We delivered sorry, single-digit growth in this period. We've got over 3.5% household penetration.
There's no structural difference between what we see in Hong Kong and what we're experiencing in China, apart from the fact that our distribution in China is mainly tier-one cities. We measure attitudes towards our category, and we believe with a general move towards natural premium health and wellness, this is a trend that supports Comvita.
A question from Yubeng. The share price is so depressed. Do you have a buyback plan?
No, we don't. Appreciate the question. As a fellow shareholder, it's absolutely our determination to ride through this period but take every action we can to make sure, as I say, we're prudent in this period but then prepare ourselves and deliver the growth opportunity that's in front of us.
The reason that we don't have a buyback plan is just in terms of prudent capital management that when we've got an inflated level of net debt currently, we wouldn't add to that by buying back shares from the market.
Question from Christian. ANZ H2 growth of 7.5%-12.5% is still an acceleration. What underpins this given economic environment is potentially worse?
Look, I wouldn't necessarily agree that the economic environment's worse. As you say, we have delivered 6.5% in the first half. We know that in our portfolio, we have certain products that have seasonal strength, and we have a good view of forward demand for those products. And also, as China demand normalizes, the Asian Health Channel also starts to benefit from that China demand, mainland China normalization.
A question from Jesse Watson, and actually one that immediately follows from Josh Dale, which are actually, I think, effectively the same question. You say that you're going to reduce the price in honey for the first time in four years but are carrying more inventory than targeted. Does this mean we should expect an impairment in stock at year-end?
And Josh's question is very similar. So I'll answer that question. The answer is no. There will be no requirement to impair inventory at year-end related to the reduction in the price that we're bringing the Apiary inventory honey into inventory. The reason is this: that effectively, Josh, you're right. We do hold raw honey at the lower of cost or net realizable value. We do not hold raw honey effectively for sale. We use raw honey to convert into a finished product and sell it on the shelf.
We generate margins of circa 60% on our finished products, so therefore, there is no impairment in the holding cost of our raw honey. Effectively, by bringing the raw honey in at a lower price, it enables us to lower the weighted average cost of raw honey held in inventory.
Okay. Next question from David Oxley. Asia sales in H1 were NZD 19 million, including NZD 7 million of sales from HoneyWorld. A similar HoneyWorld contribution is expected in H2. That implies a sizable improvement in underlying sales subsequently. What is this? I think this is a question we've answered subsequently or previously.
Yeah, I think so. So again, David, so last year, H2 sales in Rest of Asia, I assume that's the segment you're talking with, NZD 19.2 million. Obviously, in that period last year, we didn't have HoneyWorld as part of the group. We sold to them as a customer but not part of the group. So that's a significant proportion of the growth that we're anticipating.
We have one more question left, David. This is from Paige Hennessey. Given your debt and inventory position, why did you decide to pay a dividend?
Thanks for the question, Paige. Look, we have real belief in the future opportunities in front of us. And for this period, we wanted to balance distributions to shareholders but also express our confidence in the future while making sure that we look after our capital. So in the end of it, it was a judgment call to recognize our shareholders but also our confidence in what's ahead of us.
A follow-up question from David, and I assume it's related to the question that we just asked, which, David Oxley, this is. Sequentially, H2 versus H1, I think David Oxley's referring to Rest of Asia, David.
Yeah. Sorry, what's the question?
It's basically sequentially H2 versus H1.
David, can we? I'm not sure I fully get the question. So perhaps I come back to it when we see you on Friday, I believe. So if we can answer that then, I'd appreciate it.
Yep. And that's the end of questions. So I think that we will sign off now and thank everyone very much for joining the presentation this morning. And that's it. So thank you very much from Nigel and also from David.