Pacific Brands halves first half loss; repays debt with asset sale proceeds

Pacific Brands [NZX: PBG], the Australian apparel business whose stable of brands include Bonds, Berlei and Sheridan, halved its first-half loss as it took smaller impairment charges than a year earlier, and repaid debt after selling its unprofitable units.

The Melbourne-based company reported a loss of A$108.7 million, or 13.1 cents per share, in the six months ended Dec. 31, from a loss of A$219 million a year earlier, it said in a statement. That included impairment charges of A$138.5 million, largely from writing down the value of goodwill and brand names. Still, revenue rose 6 percent to A$391.8 million.

In November, Pacific Brands sold its unprofitable footwear and sporting apparel brands, generating gross proceeds of A$226 million which it used to repay debt. As at Dec. 31, the apparel firm's net debt was A$24.2 million, down from A$249.1 million six months earlier.

"The recent divestments of Workwear and Brand Collective have substantially simplified our business and, along with increased focus on inventory management and cash flow, we have restored balance sheet strength to the group," chief executive David Bortolussi said. "Parts of our wholesale business continue to be challenging, particularly in discount department stores, but our retail business performed well, especially over the Christmas trading period."

The company's underlying pre-tax earnings from continuing businesses fell 24 percent to A$31.5 million in the period from a year earlier. It expects second-half earnings before interest and tax from continuing operations and before significant items to beat the A$25.9 million reported a year earlier, though it's unlikely to exceed its first-half result.

The board didn't declare an interim dividend, with priority being placed on strengthening Pacific Brands' balance sheet.

"Future dividends will next be considered at the full year having regard to performance, outlook and financial position at the time," it said.

Pacific Brands' operating cash flows increased to A$26.9 million in the six months ended Dec. 31 from A$19.2 million a year earlier. It repaid A$241.5 million of debt in the period, and held cash and equivalents of A$79.4 million as at Dec. 31.

The dual-listed shares were unchanged at 48 cents on the NZX, and have declined 5.9 percent this year.

Pacific Brands' underwear unit lifted sales 4.1 percent to A$252.6 million in the half from a year earlier, while earnings dropped 26 percent to A$26.7 million. Its Sheridan division boosted sales 14 percent to A$95.3 million and increased earnings 5.4 percent to A$8.7 million, while its Tontine & Dunlop Flooring division's sales edged up 1.2 percent to A$43.8 million as earnings gained 14 percent to A$2.9 million.

Bortolussi said the significant decline in the Australian dollar over recent months put increased pressure on the industry, and it would need to increase prices from the winter 2016 season when hedge books unwind.

(BusinessDesk)