Pacific Brands (PBG) rode the rebound nicely yesterday after it told investors it expects to rejoin the ranks of dividend-paying companies next year.
As a result the market focused more on the future rather than the $97.7 million loss in 2011-15, which was the company’s fourth loss in five years.
But stripped of one-offs, Pacific said underlying net profit rose 5.1% to $37.5 million in the year to June, in line with market forecasts.
The bottom line loss was due largely to non-cash impairments on goodwill, brand names and plant and equipment totalling $138.5 million, which was driven by a change in the definition of cash generating units, as well as adverse moves in foreign exchange rates.
That followed a rebound in earnings in the June-half, underpinned by strong gains in Pacific Brands’ key Bonds and Sheridan brands. That was the subject of a surprise trading update in early July.
The company didn’t pay a final dividend. but told shareholders it expects to resume payouts for the December half year results and with a payout ratio of at least 50% of after tax profit.
After all that, and in the midst of the big relief rally yesterday, investors pushed Pacific shares up 15% to 44.5 cents.
PBG 1Y – Pac Brands eyes return to dividends
Sales from continuing operations rose 5.4% to $789.7 million, thanks mostly to the stronger retail sales growth in Bonds and Sheridan stores (sales were up 13% and 15% respectively) which offset weak wholesale sales growth.
After selling brands such as King Gee, Volleys and Dunlop for $220 million last year, CEO David Bortolussi is expanding the company’s retail outlets to offset continuing margin squeeze from existing retailer channels, such as department and discount clothing stores.
And Mr Bortolussi said the strong sales momentum had continued into the first eight weeks of 2016, with sales to date up 8%.
But he cautioned that investors should wait and see trading in the key months of November and December.
He also indicated the company wants to raise prices and cut costs to offset the impact of the weakening Australian dollar.
PBG says it expects 2016’s earnings before interest and tax (EBIT) before one-off items top underlying 2015’s EBIT of $64.2 million, which were down 4.8% on the previous year.
He repeated that changes in foreign exchange rates “may impact future earnings”.
As expected there’s no final dividend, but a payout is on hand for 2016.
The company now has cash on hand of close to $1 million against debt of $249 million a year ago.
