Following speculation about the CEO succession which was quashed earlier this year, A2 Milk Company Ltd (Australia) (ASX:A2M) announced today that it will lose its CEO, Geoffrey Babidge, when he steps down at some point in 2018.
Babidge will be replaced by Jayne Hrdlicka, the current CEO of Jetstar Airways, which is a Qantas Airways Limited (ASX: QAN) subsidiary. Hrdlicka has a background in leadership including 13 years as a senior partner at Bain and senior roles in the publishing industry and at Qantas, according to her LinkedIn profile.
New CEOs usually bring a period of change, as the incoming individual looks to exit old programs that weren't working, and make their own mark on the company. In the case of a2 Milk it's hard to see any programs that might need to be exited, as the company's performance has been fairly 'a2tonishing' over the past couple of years.
So I imagine that the new CEO will be focused mostly on building and marketing the a2 brand internationally, and indeed Ms Hrdlicka does have a background in marketing roles and a2 has guided for a big lift in its marketing spend this year.
While I would have preferred to see an internal candidate elevated, and also preferred to see one without a consulting background, I couldn't find any fault with the appointment. That doesn't reduce the uncertainty the appointment will bring, however.
At the recent Annual General Meeting, a2 reported that ongoing performance was strong, with revenues for the 4 months to October up 69% on the same period last year. Net profit after tax was up 138% over the same time frame, although management also warned that higher ingredient costs and changes to the product mix were placing some pressure on margins.
Overall a2 looks like it's in a great place, although I think its valuation is quite lofty and I recently sold a fair chunk of my shareholding.
