For personal use only

Transcription

1 Pental Limited Annual General Meeting Monday 27 November 2017 Royce Hotel 379 St Kilda Rd, Melbourne

2 Good morning Ladies and Gentlemen, it gives me great pleasure to welcome you all to the Pental Limited Annual General Meeting for For personal use only Before we get to the formal business of the meeting, I will say a few words and then our Chief Executive Officer Charlie McLeish will make presentations on our current and future strategies. Financial Performance The 2017 Annual report, which includes the financial statements for the year ended 2nd July 2017, was released to you our Shareholders last month. Net profit after tax was $5.85 million, up 3.8% on last year and underlying Earnings Before Interest Tax and Depreciation was $11.9 million for the year, up 10.1% on last year, this excludes one off ACCC legal costs of $160k. Our focus on organic growth, coupled with ongoing emphasis on product innovation resulted in solid sales growth in both the Australian and New Zealand Markets. Net Sales (Gross sales less trade spend) in Australia was up 6.3% on the prior year (or 4.5% on a like for like 52-week basis) and New Zealand in AUD$ was up 4.67% on prior year (or 1.8% on a like for like 52-week basis). Solid steady progress continued in Asia and this was reflected by our Net Sales in Asia having nearly tripled (2.7 times) on the prior year to $1.8 million. Operational excellence and continuous improvement underpin 2 of the Company s 5 strategic objectives: Creating a solid platform for growth and Driving year on year productivity savings. Our health and safety vision, Safety must always come first, means we will not compromise on workplace safety in the pursuit of other business goals. We care about the health and safety of our employees, contractors and visitors, and we are focused on eliminating work related injury. We believe that all incidents are preventable. There is a continuing commitment to identify and eliminate risks with the prime objective being to prevent injuries from occurring. Through a safety conscious work force supported by safety initiatives such as safety walks by managers, random safety reviews for sections of the plant and monthly safety meetings we have not only protected our team, but Pental s WorkCover continues to be below industry standard. In January an unforeseen breakdown of the recently installed Filler on one of the bleach lines, caused stock shortages and an estimated impact of $500k in lost earnings. The issue was due to a seized main bearing which has been replaced and cause mitigated from occurring in the future through integration into the company s preventive maintenance program schedule. During the year $3.067 million of capital improvements were undertaken which included the completion of projects initiated in the prior year such as soap cutting equipment, the SWING plant and installation of the new bulk plant. Following the new bulk plant commissioning in September 2016, it delivered on the first objective to reduce the cost of bulk products previously outsourced and produced a new range of commercial and industrial cleaning products under the White King and Sunlight brands. Page 2 of 5

3 For personal use only Driving an agile business, eliminating low value activities and reducing costs through product cost innovation and improved manufacturing techniques, supply chain optimisation and improved procurement all lead to savings that can be reinvested to drive growth and improve profitability. Whilst the constant change of market conditions and ongoing price increase pressures from local and overseas suppliers has not subsided, Pental s continuous improvement projects delivered significant savings of $1.083 million during the financial year. Optimising value growth from our portfolio is a strategic objective of our Company. Innovation is a key platform that underpins this objective. We launched a number of new products into growth categories, some not previously tackled by Pental. The success and learnings have varied, but our innovation and drive to become a product leader is a key priority Pental will continue to aggressively pursue. The company continued its track record of having a strong and healthy cash position. At the close of the financial year the company had $11.7 million in cash reserves and no debt. As was put forward to our shareholders at the 2016 AGM for voting (for 96%, against 4%) the company exercised its option to reacquire the Shepparton property where its manufacturing plant is located. Settlement occurred on 2nd August 2017 and $7.4 million of the company s $11.7 million was utilised to repurchase the property. The board were pleased to approve a final fully franked dividend for the 2017 year of 2.10 cents per share. Bringing the total full franked dividend to 3.25 cents per share (representing a payout ratio of 75.7%), which is 0.30 cents higher compared to the prior year. Shareholders will note that since 2013 the total dividend has increased from 0 cents to the current 2.95 cents per share. The board continue to maintain a dividend policy that is mindful of the needs and expectations of shareholders whilst providing a continuity of sustainable earnings for both Pental and our Shareholders. Outlook The year ahead brings with it some very strong heads winds. Last Tuesday Pental Limited announced that it is expecting a lowered financial performance in the first half of FY2018 compared with the first half of FY17 due to disruption in the Australian retail landscape from new entrants. Pental has taken a strategic decision to defend its leading market share and shelf position in key product categories. This has required investment in marketing initiatives, including price matching and promotional activity, so that Pental can compete effectively in the current retail environment. Our commitment and resilience through these challenging times, focusing on the longterm sustainability of Pental and return on investment for our Shareholders continues to be the key priority for your board. The current landscape in which the Company operates in is A disruptive retail landscape in a competitive retail price deflationary environment Growth in private label driven by Aldi and which is forcing the majors to respond aggressively, placing additional pressure on our local manufacturing site to drive sustainable year on year productivity savings Page 3 of 5

4 Relentless competition in the General Household Cleaning category from new entrants using Price as the core platform of their value proposition Increases in gas and power prices continues to place pressure on already higher costs of local production compared to imports How is the Company responding to these challenges? We look at where we can to take costs out of the business and continue to focus on our five strategic pillars to drive growth which centre around Consumer and Customer Minded, Innovation, Brands and Private label. Strategic Pillar No.1: Creating a solid platform for growth: The next major phases of our manufacturing capital investment strategy involve Increasing the level of automation in both the bar soap factory and soap packaging areas Increasing plant capacity to produce non-bleach based products. This will involve using existing bleach filling and packaging equipment with new batching equipment and processes to produce both non-bleach and bleach products Whilst DIFOT has returned to industry acceptable levels, further works are underway to ensure raw materials are delivered in time and as specified, such as in supplier operational audits, and that the preventative maintenance program is further improved to minimise unplanned stoppages thus increasing plant efficiency. Strategic Pillar No.2: Optimising value growth from the current portfolio: Driving product innovation is the growth engine of our brands. Areas of focus for the company in 2018 include New packaging innovation Product size configuration Shelf Presence Line Extensions Expanding into new household cleaning segments Strategic Pillar No.3: Driving year on year real productivity savings: Areas the business is focusing on include: Raw material and finished goods supply contracts Waste reduction from production lines Review of our Freight and Supply Costs Increasing plant optimisation and efficiency Strategic Pillar No.4: Accelerating our capability to grow the export business and private label: In our export markets NZ sales in NZ $ for the first four months of the 2018 financial year are 5% up on the same prior period whilst sales into Asia are 72% up for the same prior period. The outlook trend for both markets remains positive. Page 4 of 5

5 The company s private label pipeline remains solid. We currently manufacture for private label in the Bleach, Soap and Fire Lighter categories and are looking to extend into new categories. Strategic Pillar No.5: Driving growth through non-retail commercial and industrial channels: In July 2017 the company s business development manager for commercial and industrial commenced. With a dedicated resource in this area the company is making steady progress establishing itself in this new and strategically important channel. Conclusion It is a great privilege and pleasure to serve you as your Chairman. I would like to thank our Employees, Consumers, Customers and Suppliers for their dedication, support and loyalty to Pental and our great Brands. I would also like to thank my colleagues on the board for their collective efforts during the year and to you our shareholders for your ongoing commitment and loyalty and for your attendance here today. Peter Robinson Chairman Page 5 of 5