Pact Group's half year to Dec 17 results show its portfolio diversification is delivering growth.
Pact Group today announced a profit of $44.1 million for the half year ended 31 December 2017. Net profit after tax before significant items* was $50.5 million, down 4% compared to the prior corresponding period of $52.9 million. (See results highlights below).
Speaking at the result announcement, Pact Group MD & CEO, Malcolm Bundey, said the company has transformed its product and service portfolio into sectors offering attractive growth opportunities.
This included investment of over $200 million in its contract manufacturing and materials handling platforms, in addition to increasing its packaging capability to support growth in the health and wellness sector.
“We continue to realise the benefits of these investments,” Bundey said.
“Our new Australian crate pooling business, providing fresh produce supply for Woolworths, commenced operations. Commissioning activities were completed on schedule with earnings in the period above expectation. This has been an important milestone in establishing leading positions in pooling services for returnable produce crates in both Australia and New Zealand.
“Our contract manufacturing businesses delivered robust growth in the period. Pascoe’s, acquired in February 2017, delivered strong volumes, with earnings in the period above expectation. Jalco and APM also performed well, assisted by the ramp-up of new contracts and improving demand in the health and wellness sector following customer destocking in the prior year.
“Improved demand in the health and wellness sector also positively impacted volumes in our rigid packaging businesses. We are pleased to see the benefit of our increased exposure to this sector following recent investments,” Bundey said.
In the period the Group enhanced its geographic diversity with the acquisition of the Asian packaging operations (excluding Japan) of Closure Systems International (CSI) and the Guangzhou China facility of Graham Packaging Company (GPC) (together “the Asia Acquisition”).
This acquisition, excluding Nepal, completed on 15 February 2018 for a provisional consideration of US$109 million.
The Group expects to complete the acquisition of CSI Nepal for provisional consideration of US$4.8 million by 30 June 2018. CSI is a leader in rigid plastic closure design and manufacturing. GPC is an established market player in injection blow moulded and extrusion blow moulded bottles in China.
The Group also made a further investment in Australia in the materials handling and sustainability sector with the acquisition of ECP Industries, an IBC and tank reconditioning business, for provisional consideration of $11.5 million.
“We have been very pleased to welcome these businesses to the Group. CSI and GPC are strongly aligned with our existing rigid packaging businesses and build scale to our footprint in Asia, establishing a strong platform to accelerate growth.
The businesses significantly enhance our customer diversity, manufacturing, technology and management capability within the Asian region and provide a low-cost manufacturing base which can support new product sales into existing markets.
“In Australia, ECP provides attractive growth to our existing materials handling and sustainability businesses.
“The Group today enjoys leading positions in attractive sectors with significant long-term growth opportunities. Pursuing these opportunities whilst maintaining our strong positions in our core sectors is central to our strategy,” Bundey said
PACT GROUP HALF YEAR RESULTS HIGHLIGHTS
- Sales revenue up 11% to $808 million
- EBITDA in line with AGM guidance and pcp at $121 million
- EBIT of $87 million, impacted by higher depreciation and amortisation
- NPAT of $51 million
- Earnings benefits realised from transformational growth initiatives undertaken in the prior year
- Strong underlying revenue growth in Australia in the contract manufacturing, materials handling and sustainability sectors
- Stable rigid packaging volumes supported by improved demand in the health and wellness sector
- Commissioning of the new crate pooling business completed on time, with earnings in the period ahead of expectation
- Acquisition of a strategic growth platform in Asia
- Strong interim ordinary dividend of 11.5 cents per share, franked to 65%
- Continued strong cash generation
- Robust balance sheet supported by $176 million equity raising with gearing of 2.2x
* This included a significant expense after tax of $6.4 million. The significant expense after tax included $5.1 million for revisions to earn-out provision estimates mostly due to stronger than expected earnings from Pascoe’s in the period.