PACB0006 Annual Report 2006.Indd
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+ PACIFIC BRANDS REPORT + ACCOUNTS 2006 RPACIFIC BRANDS LIMITED AND AITS CONTROLLED ENTITIES ABN 64 106 773 059 234,638 Pairs of underwear PACB0006 – Annual Report 2006 – Proof 7a – 06/09/06 The Ball Group Investor and brand communications Tel: +61 3 9600 3499 Fax: +61 3 9600 3477 158,904 Pairs of socks B Pacifi c Brands 63,013 Pairs of shoes Report+Accounts 2006 1 68,493 Outerwear garments 43,836 Kilograms of foam 2 Pacifi c Brands 63,347 Pairs of hosiery 41,095 Square metres of carpet underlay Report+Accounts 2006 3 13,699 Golf balls 10,959 Pillows 4 Pacifi c Brands 1,027 Mattresses 12,035 Tennis balls Report+Accounts 2006 5 234,638 Pairs of underwear 158,904 Pairs of socks 68,493 Outerwear garments 63,347Pairs of hosiery 63,013 Pairs of shoes 43,836 Kilograms of foam 41,095 Square metres of carpet underlay 13,699 Golf balls 12,035 Tennis balls …EV E 10,959 Pillows 1,027Mattresses 6 Pacifi c Brands V ERYDAY All over Australia and New Zealand people not only wear our brands but they sleep in our brands. They play sport in our brands. They go to work in our brands. They dress their children in our brands. Virtually every aspect of their lifestyle incorporates our brands. Every day. Every week. Every month. That’s the power of everyday essential brands. A strategic platform for building shareholder value. Report+Accounts 2006 7 Annual Report 2006 Highlights 2006 Over the last fi nancial year we have delivered a steady fi nancial performance while continuing to build a strongly branded business and the platform for future growth. • Net sales revenue $1,624.9 million, up 6.8% on previous year • $192.3 million EBITDA, up 1.3% • $173.0 million EBIT, down 0.9% • $101.2 million net profi t after tax, up 0.3% • Earnings per share of 20.1 cents, unchanged • $80.0 million net operating cash fl ow, up 6.5% • Announcement of an on market share buy-back of up to $75 million 8 Pacifi c Brands Financial results for 2006 2006 20051 Change $m $m % Branded net sales 1,509.0 1,381.1 9.3 Unbranded net sales 115.9 140.6 (17.6) Total net sales 1,624.9 1,521.7 6.8 Gross margin2 680.2 630.3 7.9 EBITDA 192.3 189.8 1.3 EBIT 173.0 174.6 (0.9) EBIT margin 10.6% 11.5% NPAT 101.2 100.9 0.3 Earning per share (cents per share)3 20.1 20.1 – Dividends declared per share (cents per share)4 15.0 15.0 – 1 Restated to refl ect changes to the Australian equivalent to International Financial Reporting Standards (AIFRS). 2 Includes other income but excludes interest. 3 This has been calculated from an issued capital base of 503,000,003 fully paid ordinary shares. 4 Interim and fi nal dividend – both franked to 100% for Australian residents, on tax paid at 30%. Five years fi nancial comparison ($ million) 1,600 200 200 80 1,500 75 160 1,400 150 70 120 1,300 65 80 1,200 100 60 40 1,100 55 1,000 50 0 50 ’02 ’03 ’04 ’05 ’06 ’02 ’03 ’04 ’05 ’06 ’02 ’03 ’04 ’05 ’06 Sales EBITA Sales EBITA Gross Operating Cash fl ow Cost of Doing Business to (Gross operating cash fl ow post Gross Margin % capital expenditure, but before net (Costs include freight, distribution, fi n ancing costs and income tax) IT, sales and marketing, advertising and administration) Report+Accounts 2006 9 Annual Report 2006 Pacifi c Brands since the fl oat and was instrumental Chairman’s letter in helping us move forward as a public company. Her advice and counsel have been invaluable. On behalf of my fellow directors and the shareholders, I would like to take this opportunity to thank Helen for her considerable contribution during her time on the board of Pacifi c Brands. We wish her all the best. The Board is in the process of recruiting another The very strong consumer brands of Pacifi c Brands non-executive director with suitable experience to comprise the cornerstone of our success and are the complement the backgrounds of our other directors. ongoing basis for our business model. The 2006 fi nancial As a member of the community, it is important to Pacifi c year saw a period of fl uctuating consumer confi dence Brands to contribute and be involved in broader ways including the impact of rising fuel costs, interest rate than just as an employer. Not only do we support our increases and most recently tax changes. All of which employees individual involvement, we continue to look affected the retail landscape. We have continued to focus for ways to enhance the company’s commitment. During on the fundamentals that make Pacifi c Brands a good the year we strengthened our long standing relationships business and this enabled the business to generate a with the Breast Cancer Network of Australia and solid performance for the year. developed new partnerships with the Prostate Cancer We believe that a sharp focus on brands and products Foundation of Australia and the Brotherhood of that meet the essential, everyday needs of our consumers St Laurence. across all our markets and channels gives us a sustainable We look forward to the year ahead and believe that competitive advantage. We describe further our main the business will deliver an improved performance. capabilities later in this report including the importance Our strong dividend yield will continue to make Pacifi c of leveraging our scale and the ongoing achievement of Brands an attractive investment for our shareholders. operational effi ciencies in all areas of our business. We have a good management team who has led us Our strategy is supported by a disciplined approach to skilfully through the last year and has positioned us well fi n ancial management. The business continues to generate for the future. On behalf of everyone at Pacifi c Brands, strong cash fl ows and has a robust balance sheet. Our thank you for your loyalty and continued support. well documented strategy has been to supplement organic growth with strategically relevant, well priced, earnings accretive acquisitions. We were pleased to add four new businesses in the current year, with the most notable being Sheridan. Pacifi c Brands will continue to use its balance sheet strength appropriately, whether it be investing in Pat Handley our existing businesses, acquiring new ones or pursuing Chairman capital management initiatives, such as the share buy- Pacifi c Brands Limited back announced in August 2006. Helen Lynch – our Deputy Chairman has decided she will not be standing for re-election at the Annual General Meeting in October. Helen has dedicated herself to 10 Pacifi c Brands ‘ The strength of Pacifi c Brands ensured the achievement of a solid fi nancial performance in a more uncertain business environment. The results are consistent with our record year for the previous fi nancial period.’ Report+Accounts 2006 11 Annual Report 2006 12 Pacifi c Brands ‘At Pacifi c Brands, we have a unique relationship with our consumers by providing them with brands they respect and products they use each and every day. We will continue to develop and enhance our relationship with our consumers.’ have the number one (or two) brand in each category CEO’s report within our portfolio. We will continue to grow our brands through extensive consumer research, relevant and timely advertising campaigns and targeted marketing. Leveraging our scale and best practice As a large business, Pacifi c Brands can and will do more to leverage our scale across all areas of our operations from product development and manufacture right through to In the 2006 fi nancial year, we produced a steady net distribution and on to the retailer’s shelf. We have identifi ed profi t after tax and improved operating cash fl ow in a areas of excellence across the Group and are working hard very competitive market. Even though a continued focus to spread ‘best practice’ from business to business, and on the fundamentals of the business enabled us to brand to brand. We are looking into ways to maximise generate solid results, they did not meet the high operational effi ciencies. As a result, several key strategic expectations that we had set ourselves. initiatives are currently under way to achieve these objectives – including but not exclusive to logistics and technology. To put us in a stronger position to increase earnings growth for next year, we have developed and now Managing the brand portfolio established new processes, systems and targets. There We regularly assess our existing brands for their contribution is a stronger focus on big campaigns and tighter ranges and relevance, and will continue to supplement organic in our key brands. So far we are on track for growth. growth through the active pursuit of relevant, well priced acquisitions. During the year we completed the acquisitions The business model of Sheridan, Arthur Ellis (Homewares New Zealand and Our business model is simple: Everwarm Survival businesses), Peri and Foam Products • developing, building and maintaining strong Australia. There are still many opportunities. We have a consumer brands successful track record in making earnings accretive ‘bolt- • leveraging the Pacifi c Brands scale across all our on’ acquisitions. We also have strict fi nancial and strategic functions for economy and effi ciency, and disciplines in our review process of these opportunities. • making strategic acquisitions to further enhance We will only acquire when it makes good business sense.