Investment Matters

Pact Group - above expectations

Pact Group's results were a little better than the expectations of your Investment Team, and it continued the trend from recent periods - flat underlying performance in challenging trading conditions, with good contribution from acquisitions boosting performance.

Sales revenue increased 11% in FY-16, compared to FY-15.  Net profit also increased 11% and dividends increased 8%.

The company's Australian operations (the company's main division) grew revenue strongly: +16%.  Earnings increased 11%, with a slightly reduced margin.  The significant Jalco acquisition was the main contributor to the growth, with it now integrated into Pact and performing ahead of expectations.  Conditions remain challenging, especially in the agricultural and industrial sectors, and the underlying business had net contract losses.

Pact's international division (principally NZ, also various locations in Asia) had a 1.6% fall in revenue, with efficiency measures resulting in an earnings increase of 1.1%.  Improved demand from the materials handling and non-dairy agricultural sectors was evident in H2.

The outlook for FY-17 is for higher revenue and earnings than FY-16 (subject to economic conditions).  We expect a step-up in earnings in FY-18, driven by a long term partnership with Woolworths.  This partnership is for the provision of returnable produce crates (>4 million of them), and the associated logistics, to commence in Q1 FY-18.