Pac Brands, GWA Results OK

By Glenn Dyer | More Articles by Glenn Dyer

The market didn't like Pacific Brands' 4.7% rise in full year earnings and the forecast of a 10% better effort this financial year.

Judging by the 12c fall to $3.10, there's a feeling of 'can do better', especially as retailing has been a pretty solid part of the economy, especially in the first half of this year.

Due to a warm autumn, women's clothing has it tough, although winter has been cold and wet in many states.

Any impact on Pacific should have been offset by a couple of major expansionary moves during the year with the buys of Yakka and some of the streetwear brands of Globe International.

The underwear and hosiery group said net profit was $105.96 million in the year to June 30, up from $101.21 in the previous year. But before minorities, the result was up 6% at $107 million, which is slightly better but still doesn't explain the negative reception.

Pacific said it was well positioned for growth in the fiscal 2008 financial year and expects sales, earnings before interest, tax and amortisation (EBITA) and net profit after tax (NPAT) to increase strongly.

"We expect both Sales and EBITA to rise by between 15 per cent and 20 per cent," it said in a statement issued with the profit announcement yesterday.

"Given the higher interest bill, following debt-funded acquisitions, we expect NPAT to rise by around 10 per cent-plus."

With a forecast as strong as that (net earnings up around $118 Million), investors seemed to have been deaf.

Pacific Brands reported total net sales up 12.1% for the year to $1.8207 billion. Earnings before income tax, depreciation and amortisation (EBITDA) were up 12.5% to $216.4 million, and earnings per share were up 6.1% cent to 21.3 cents.

The company did noticeably better in the first half with net profit up 6.8%. And while sales were up 4.1% in the first half, the second half was boosted by the Yakka acquisition and the purchase of some of the brands from Globe International.

The company announced a final dividend of 8.5 cents fully franked, bringing total dividends to 16.5 cents, up 10% over 2006.

"The consistent strategic direction of the Company continues to deliver strong results," chief executive Paul Moore said.

"Investment in brands and people, product innovation, a continuing drive for operational excellence and well targeted acquisitions all contributed to the result.

"The acquisitions of the Yakka Group and Brand Collective (formerly the Streetwear division of Globe (International) have been excellent additions to Pacific Brands, opening new categories, strengthening existing category and channel positions and adding to our portfolio of iconic brands."

Mr Moore said consumers were "increasingly demanding better products, more choices and faster product introductions.

"Innovation and product development therefore remain key drivers of our sales growth. Ongoing investments in our brands and a disciplined approach to category management have generated improvements in the core businesses.

"Our people remain committed to the ongoing development of our brands and their category leadership positions."

He said operational efficiency was a strategic driver for Pacific Brands.

"We will continue to leverage our increasing scale and to work collaboratively with our suppliers and customers to meet their evolving business requirements," he said.

"We are pleased with the strong cash generation during the year providing the opportunity for us to pay down debt and continue with our investment in brands."

Mr Moore said the 2008 year had started well.

Mr Moore is retiring as of the end of the year and the company has named Group General Manager Underwear and Hosiery, Sue Morphet as his successor.


And in something completely different Brisbane-based homewares company GWA International yesterday reported a 0.9% drop in net profit for the 2007 financial year, thanks to lower contributions from the group's Dux and Rover Mowers operations.

Net profit after tax eased to $56.318 million after GWA reported a 4.1% rise in sales to $645.669 million, and a 3.7% rise in trading earnings to $98.754 million.

Drought and industry changes were major factors which offset stronger gains from GWA's more traditional bathroom and sanitaryware businesses which are reaping the benefits of a bit restructuring in 2005.

Managing director Peter Crowley said GWA's Caroma Dorf and Gainsborough businesses had been "stand out performers", but profit contributions from Dux Hot Water and Rover Mowers had been "were well below the prior year, with both impacted adversely by industry change and, in the case of Rover, the drought.

"The Dux contribution was also reduced by the volatility of values for Renewable Energy Certificates," Mr Crowley said.

The group's furniture business, Sebel, contributed a solid profit result, excluding the $1.8 million in rent expenses flowing from the sale and leaseback of its Bankstown premises at the end of the prior year.

During the 2006/07 year, the company said it implemented further business reorganisation initiatives with a cost of $7.3 million ($5.1 million after tax).

Mr Crowley said, "I am very pleased with the group's trading performance in the 2006/07 year, particularly as the increase in trading EBIT has been achieved in a tight market and during a period of extensive and successful restructuring.

"The group's core business activities are continuing to strengthen their cost competitiveness and market positions".

Directors have announced a final dividend of 10.5 cents per share fully franked, comprising an 8 cents per share ordinary dividend and a further 2.5 c

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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