What, another bit of bad news from Pacific Brands (PBG), and the shares, well, do nothing?
Unlike the last couple of statements or updates from Pacific, yesterday’s annual meeting and a repetition of the earlier, gloomy outlook for the 2015 year was not greeted by a stampede for the exits by nervy investors.
The shares sort of went nowhere, which can be counted a small vote of confidence.
Shareholders at yesterday’s annual meeting in Melbourne were again warned to brace themselves for another fall in earnings this year as rising costs and weaker gross margins erode higher sales.
Chief executive David Bortolussi who took the helm in August after the surprise departure of John Pollaers, said earnings before interest and tax were expected to fall materially in the first half of 2015 but would exceed the $36 million earned in the June-half last year.
Bortolussi also told shareholders that sales had risen in the first quarter of 2015, underpinned by gains in the company’s bricks and mortar and online stores, and the trend was expected to continue through the December half.
However, gross margins were expected to come under pressure from the weaker Australian dollar and discounting by rivals, while investment in retail operations was expected to drive up operating costs.
Bortolussi also flagged further restructuring costs and more asset sales as PacBrands worked its way through a strategic review aimed at simplifying the business and improving shareholder returns.
PBG 2Y – Tough times for Pac Brands
Bortolussi told the meeting that “operating cash conversion and net debt reduction will be a key focus, notwithstanding the lagged impact of committed inbound stock flows, first half weighted retail store capital expenditure and the payment of F14 restructuring provisions”.
Pacific Brands, whose labels also include Sheridan, suffered a loss of $224 million in the 2014 financial year as competition hurt profit margins and the company took an axe to asset values.
As a result of a company-wide review, Pac Brands is selling its workwear division, which includes the Hard Yakka, KingGee and Stubbies brands, for $180 million as it looks to concentrate on the core Bonds and Sheridan businesses.
Judging on comments at the AGM, there may be more disposals in the pipeline.
The shares rose 0.6% to 44.25c, eased back, and then rise in late trading to end up 1.1% at 44.5 cents.
But at least they didn’t take fright and plunge (as they have done at least twice in the past year) when bad news has been mentioned.
This time though the news yesterday was essentially an underlining of the previously discussed weak outlook for this year, especially the first half.
Chairman Peter Bush however warned shareholders that they can expect more news on restructurings in the wake of the review conducted earlier in the year that helped lead to the loss of the former CEO.
"There will be more outcomes from the review and we will keep you informed. Suffice to say for now – we will continue to review portfolio rationalisation options as appropriate to further simplify the business and maximise shareholder value,” the chairman told the meeting.
Mr Bush repeated the sentiments of the CEO about the rest of the current financial year when he told the meeting, "Looking ahead, F15 will remain challenging, with variable market conditions likely to be unchanged. We will continue to work to reduce costs and improve performance".
"I wish I were here saying that there had been a miraculous bounce back in consumer confidence and that retail was roaring once again,” Mr Bush told the meeting.
“Unfortunately, it simply isn’t.
“And while we have been taking all practical steps to engineer better performance from your business, we still have some way to go,” he added.
