Pental : Full Year Statutory Accounts.pdf

Appendix 4E Final Report‌

For the Year (52 Weeks) Ended 26 June 2016

Name of entity Financial year ended ('current period')

Pental Limited

26 June 2016

ABN or equivalent company reference Previous corresponding period ended

29 091 035 353

28 June 2015

For announcement to the market $A'000

Revenue from continuing operations Profit after tax attributable to members Reported net profit for the period attributable to members	Down	2.38%	to	79,233
	Up	10.63%	to	5,628
	Up	10.63%	to	5,628

NTA Backing	Current Period (cents per share)	Previous Corresponding Period (cents per share)
Net tangible asset backing per ordinary security	31.56	30.42

Dividends (distributions)	Amount per security (cents per share)	Percentage Franked
Interim
Current period	1.00	100%
Previous corresponding period	0.85	N/A
Final
Current period Date of the dividend is payable Record date for determining entitlements to the dividend	1.95 30 September 2016 12 September 2016	100%
Previous corresponding period *	1.80	100%

Supplementary comments

Please refer to the audited financial statements for the year (52 weeks) ended 26 June 2016 for an explanation of the above figures. This report is based on accounts that have been audited.

Pental Limited

ABN: 29 091 035 353

Financial Report for the year (52 weeks) ended 26 June 2016 Contents

Description Page

Chairman's Review 3

Corporate Governance Statement 5

Directors' Report 11

Auditor's Independence Declaration 26

Independent Auditors' Report 27

Directors' Declaration 29

Consolidated Statement of Profit or Loss and Other

Comprehensive Income 30

Consolidated Statement of Financial Position 31

Consolidated Statement of Changes in Equity 32

Consolidated Statement of Cash Flows 33

Notes to the Financial Statements 34

ASX Additional Information 59

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Chairman's Review

On behalf of the Directors of Pental Limited, I am pleased to present the 2016 Annual Report.

The 2016 financial year marked further pleasing progress on a number of significant strategic fronts, including the completion of major plant upgrades, the launch of multiple new products and expansion into new export markets ahead of schedule.

Pental is entering into an exciting phase of growth by executing its strategic plan that is focused on diversifying the breadth and range of the business in order to capture significant new opportunities and so we can enter into new channels. This is being achieved on a number of fronts:

• Establishing a new export channel into Asia by offering Australian-made iconic power branded products. This commenced with bar soaps being ranged into China, and from July 2016 these are being distributed through the Shanghai Free Trade Zone.

• After an extensive review of the commercial/industrial sector, the Board agreed to proceed with its longer-term objective of expanding into the commercial/industrial channel with its power brands. The new bulk liquids plant is being commissioned in September 2016 and will produce our new range of industrial-sized cleaning products.

• Following 12 months of planning with major retailers, we launched a new range of liquid soaps in the key growth segment of personal wash. This was supported with a complete refresh of our Country Life bar soaps though the new power brand "The Australian Country Life". Sale of these products commenced in June 2016.

  To support this growth, we have continued our program of capital investment at the Shepparton manufacturing and distribution site, including:

  • Installation of a one-step saponification process - "SWING" (Soap With INside Glycerine) plant;

  • Replacement of Bleach Line A filler; and completion of the full automation of Bleach Line B;

  • Streamlined our Australian finished goods warehousing and implemented a Warehouse Management System;

  • Installation of soap cutting, overwrapping and labelling equipment to meet the start-up demand for our bar soaps in China; and

  • Automation of the firelighter carton palletising process.

Whilst it was pleasing to complete these significant capital works (after several delays caused by the bleach equipment suppliers during the year), the volume of capital works and teething issues caused significant disruption to normal operations of the plant. Disappointingly, this affected our customer services levels and, in turn, led to lost sales in the Australian market.

Action has been taken to strengthen our preventative maintenance processes and engineering skills, and increase the level of stock holdings to improve our customer services levels. Moving forward, Pental is better placed heading into the next phase of its capital works to modernise and increase the capacity of its ageing soap plant and to upgrade its non-bleach liquid lines to support future growth ambitions.

We are confident that we have created an excellent foundation to drive our innovative Australian Made products into the new Australasian and broader Asian channels.

Financial performance

Net profit after tax was $5.6 million (up 10.6% on last year) and underlying EBITDA was $10.8 million (up 5.3% on last year, excluding prior year's one off significant items).

Although a solid result, the financial performance was impacted by lower sales due to inconsistent performance of the manufacturing plant, in particular the bleach lines, and lost sales opportunities from the short supply of stock. As a result, gross Australian sales fell by 2.2%. In contrast, New Zealand gross sales grew 2.1% (or 0.7% expressed in Australian dollars) as a result of market share growth and new product development despite our competitors continuing to price aggressively. Also, we were pleased to achieve $0.7 million in sales as part of our start-up phase of exporting into Asia.

Pleasingly, our ongoing focus on Profit Delivery Projects, targeted at driving costs down and improving margins, is continuing to produce solid results. $1.1 million of cost savings was generated in FY16, offsetting some of the increased labour and raw materials rate increases that could not be recovered through price rises.

Financial position

Improved profitability and strong cash flow management has resulted in our cash reserves remaining healthy with $12.3 million in cash and no debt.

In achieving another solid result, the Board has recommended payment of a fully franked final year dividend of 1.95 cents per ordinary share. This brings the total dividend for the financial year to 2.95 cents per share, representing a payout ratio of 71% (2015: 61% underlying).

The Board has also considered its longer-term position at the Shepparton site and has decided to seek shareholder approval at the November 2016 Annual General Meeting to repurchase the Shepparton property. Repurchase of the site will remove

$0.675 million (indexed at CPI) of lease costs per annum. It will be funded via Pental's existing cash reserves.

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