Well-known Australian frozen food manufacturer Patties Foods Limited (PFL) has announced a Net Profit AfterTax (NPAT) for the year ended 30 June 2013 of $4.8 million, a 75.4 per cent decline from the previous year.

The Company, which owns popular brands including Four’N Twenty, Nanna’s and Herbert Adams, said the result came after taking a non-cash impairment charge of $11.8 million against the Frozen Fruit intangible assets, but that its savoury brands continued to perform well.

“The market leading branded savoury business continued growth in the 2013 financial year (FY13) in challenging conditions,” said Mark Smith, PFL Chairman. “We remain focused on our strategy of supporting and growing our core brands through innovative new products, marketing campaigns and channel development,” he said.

“In June this year we announced a strategic review of our frozen fruit business, which is continuing. Alongside this review our periodic impairment testing process has resulted in the board recording an impairment of $11.8 milllion in the value of the intangible assets of the frozen fruit business,” Mr Smith said.

However, PFL said the core business of savoury brands continued to underpin the performance of the Company. Volumes in savoury brands continued to grow strongly, although incremental revenue was achieved at lower margins due to increased discounting levels, particularly in the In-Home (supermarket channel).

“Our manufacturing result was disappointing as we did not meet our own high standards when commissioning the automated pie packing plant, despite other parts of the bakery performing well with good improvements in efficiencies,” said Greg Bourke, Managing Director PFL.

The Company said highlights for the year included an increased market share in In-Home and Out-of-Home savoury categories, Out-of-Home sales growth from the Petrol and Convenience channel and a key bakery contract, and the strong growth of Four’N Twenty and Patties brands.

Capital Management

PFL said Net Debt reduced by $2.5 million to $68 million (compared to $70.5 million in the year ending 30 June2012) as a result of effective working capital management. The Company said the result was pleasing, considering capital expenditure of $9.8 million during the year.

Total net cash flow generated from operating activities in FY13 was $20.8 million, delivering a 121.3 per cent increase on the previous corresponding period (FY12 $9.4 million). Accordingly, the Company said the debt to equity ratio had improved to 50.9 per cent at 30 June 2013 from 51.8 per cent at 30 June 2012.

Dividend

PFL said a fully franked final dividend of 3.9 cents per share had been declared. The total dividend per ordinary share for FY13 was 7.1 cents per share, representing an underlying pay-out ratio consistent with the previous year at 58 per cent. The record date for entitlement is 17 September 2013 and the payment date is 8 October 2013.

Outlook

The Company said that while it was in a period of challenging retail conditions, it remained committed to driving earnings growth from its underlying earnings in FY13 and building strong shareholder value through:

• Continuing to invest in its strategic growth initiatives, particularly the development of its core brands and new channels. The Company expects to see the financial benefits of these initiatives over the next 2 to 3 years.
• Suppporting and growing its core brands through innovative new products and consumer promotions
• Achieving price increases across all channels to recover cost increases
• Disciplined control of costs
• Improved manufacturing efficiencies, including the benefit of the completed automation packing equipment project during the 2013 calendar year.

The results are significantly lower than expectations announced by PFL in July 2013. Australian Food News reported at the time that PFL expected NPAT for the year ending 30 June 2013 would be $16.6 million.

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