Australasia's largest manufacturer of rigid plastics, Pact Group Holdings Ltd (ASX:PGH), has today announced a strong set of half-yearly financial results.
In the six months to 31 December 2014, Pact Group's successful acquisitive and organic growth strategy has continued with the announcement of an 11.9% jump in sales revenue to $635 million, and an impressive 92.6% increase in net profit after tax (excluding significant items) to $41.8 million, versus the prior corresponding period.
Despite a slight fall in its EBIT margin to 12.1%, from 13.2%, net debt fell 6.1% to $621 million and management announced an unfranked interim dividend of 9.5 cents per share.
Commenting on the results, CEO Brian Cridland said, "Pact Group has continued its growth momentum in the first half of the financial year despite subdued trading conditions, achieving sales revenue growth of 11.9% and EBITDA (before significant items) growth of 5.2%. Sales revenue was positively impacted by the partial contribution of the Sulo business acquired in August 2014 and a full half year of the businesses acquired at the time of IPO."
Pact Group, which floated on the ASX in late 2013, has two key divisions, namely Pact Australia and Pact International.
During the half year, Pact Australia accounted for 71% of group sales and was aided by contributions of the recent acquisitions of Sulo and Cinqplast, which helped sales up 9%. Pact International (which includes New Zealand, China, the Philippines, Singapore and Thailand) saw sales climb 19.7%, despite drought conditions in New Zealand leading to some softness in agricultural and dairy sales.
Although a larger proportion of Pact's sales comes from the Pact Australia division, compared to Pact International, there was a near even EBIT split during the period of 53% and 47%, respectively. This type of earnings diversification bodes well for the company moving forward.
Commenting on the outlook, Mr Cridland said, "The first half of the year contained the usual seasonal outflow of working capital, with operating cash flow weighted towards the second half of the financial year, consistent with the normal cycle of our business."
He said, "Pact reiterates its full year guidance for higher revenue and underlying earnings in FY15 subject to domestic and global economic conditions."
Should you buy Pact Group shares?
Within minutes of the market opening today, Pact Group shares were trading more than 14% lower following the release of its results. Whilst the market may have been expecting a slightly better performance, personally, I do not believe today's report warranted such a significant sell-off. At current prices its shares trade on a forecast price-earnings ratio of 15 and 4.2% dividend yield.
