Patties' revenue declined 8.6%, impacted by the Frozen Fruit division's sales and margin decline. (Patties sold the Creative Gourmet business in Dec-15, subsequent to the frozen berries' recall. It is now focused on the bakery operations.) Bakery (including brands such as Herbert Adams and Four 'N Twenty), grew revenue 2.8%. It's associated earnings increasing 7.2%.
Cash generation was strong. Gearing is higher than we would prefer, but it did reduce marginally as compared to 31-Dec-15. A 2.7cps dividend will be paid for the half (it was suspended in the pcp because of the berries recall).
The underlying business is fine, and it has momentum. In fact, it has a great platform to grow the core savoury business (through continuing the positive sales trend in the higher-margin out-of-home segment), as well as more opportunities to continue operational and financial optimisation (which was really on hold though the berries' incident). Furthermore, Patties is attractively priced, and it provides a good income return (6.8% FY-16e including franking).