Pental’s Robust HY20 Results- Increased Sales, Strong Exports, Retail Expansions!

Australia’s consumer powerhouse Pental Limited (ASX:PTL) is back making headlines- this time with its strong performance for the half year ended 29 December 2019 (HY20). A provider of superior quality consumer goods, the Company is globally renowned for producing some of the world’s most recognisable brands that are trusted by families for generations.

Pental’s Stable Interim Performance

On 24 February 2020, PTL reported its performance for the half year ended 29 December 2019, which was heavily catalysed by positive Australian and New Zealand sales figures amid a tough retail environment in Australia.

Below are a few highlights for PTL’s robust HY20 performance-

• Bolstered by distribution agreements, the net sales revenue amounted to $55.26 million, up by 15.1% on previous corresponding period (pcp)
• EBIT was $2.214 million, up by 6.2% on pcp
• NPAT was reported high by 2.6% at $1.475 million
• The basic EPS was 1.08 cps
• Trade spend was 35.2% of gross sales, in line with last year
• Cash flow from operating activities was $3.325 million, representing a healthy cash conversion ratio of 81.7%
• Strong balance sheet with effectively no debt
• The Board announced an Interim fully franked dividend at 0.70 cps, to be paid on 25 March 2020

What Propelled PTL’s Performance?

In Australia, PTL’s market performance was driven by two additional months of Duracell trading relative to the previous year. This was further supported by an expansion into additional retailers including Target and Coles Express.

The Company remained focussed on promotions that maintained sustainable margins and worked in its favour. Even though bleach, firelighters and soakers sales witnessed marginal declines, there was stabilization in sales growth across fabric softeners and toilet sales.

Interestingly, the New Zealand market sales grew by 10.8%, which is a substantial leap over the pcp. Even though competitive and price compression clouds hovered over manual dishwash category, sales grew in bleach, cleaners, toilet and fabric softeners.

PTL invested in a new liquid filling line with in-house sleeving to service the Huggie fabric softener, recently ranged. This is expected to provide the business with flexibility and capacity to target other non-bleach-based liquids (inclusive of the private label).

Besides this, Pental successfully launched three new innovative dishwashing liquids range in IGA.

Moving towards Asia, the recent outbreak of the novel Coronavirus triggered PTL’s bleach-based and disinfectant products sales increase due to the strong demand for the product, demonstrating trust in the Australian brands.

Strategies Working in Pental’s Favour

The partnership with Duracell seems to be working in PTL’s favour, as Duracell generated 20.31% growth, by performing strongly for the last four months (relative to the September to December 2018 period). A strong Christmas season merchandising execution and PTL’s expansion into the convenience retail space via Coles Express and Target propelled this growth.

Let’s move onto exports- another strategy driving these robust results and seems promising currently. There were strong gains in the New Zealand market and a growing demand for PTL products in China, thanks to the new partnership with The Export Group and increased demand for disinfectant and bleach products in mainland China.

In today’s contemporary times, marketing is a strategic key for reaching new customer demographics. The Company’s marketing activities continue to bring relevance and delivering margin improvement across all core portfolios.

For instance, the launch of Country Life Soap for Tradies was supported by a radio partnership with SEN- bringing the station’s core audience and target market under one umbrella. Consequently, the launch was supported in independent retailers across Australia.

Promising Outlook

PTL has been investing in developing new products with unique points of difference considering retailer range reviews. It is also focused on refreshing and modernising the packaging of its products to attract a younger market.

Australia’s economically sensitive retail landscape is likely to experience challenges with increased competition, stagnant wage growth and margin squeeze. However, PTL seems to be well-positioned to tackle these market dynamics at the back of a strong balance sheet, no debt, solid brand recognition and an efficient export strategy.

Stock Performance

The stock is trading at $0.333 (AEDT 01:15 pm) on 24 February 2020, having an annual dividend yield of 6.06 per cent and is available at a P/E ratio of 23.400.

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