Patties Foods - good result ahead of takeover
Patties Foods' results showed good growth in its core bakery business, with revenue up 4.6%. This was driven by the core brands: Patties +6.2%, FOUR'N TWENTY +13.2%, Herbert Adams +11.6% and Nanna's +12.2%.
Revenue grew strongly (+7.8%) in the out-of-home channel, but was down 10.4% in the in-home (supermarket) distribution channel - impacted by reduced frozen fruit and contract manufacturing (private label) sales. Core brands all grew their in-home channel sales.
Net profit of the core bakery business increased 13.6% - a positive result. This was driven by the increased sales, as well as reduction in overhead costs of $2.6m (which included an additional $2.5m of marketing costs).
Patties has now completed the exit from its frozen fruit business, and thus it will not be a drag on future earnings. Additionally, the company's balance sheet has strengthened, with gearing reducing to 31% at 30-Jun-16 (was 36% at 30-Jun-15). This was assisted by good cash flow generation.
Because of the proposed takeover of Patties by Pacific Equity Partners (more on this below), a final dividend was not declared. The Board has the ability (which we expect it will do) to declare a special dividend as part of the takeover being successful - 25 cents per share plus franking.