10
McPHERSON’S LIMITED
ANNUAL REPORT 2015
EBIT (earnings before interest and
tax), excluding the non-cash
impairment of intangibles and
non-recurring items, was $22.5 million,
15.4% below FY2014 ($26.6 million*).
Excluding non-recurring items and
impairment of intangibles, profit
before tax was $16.4 million, 18.2%
below FY2014. Non-recurring items
before tax in FY2015 included $4.1
million in restructuring costs, a $2.0
million interest rate swap termination
loss, a $2.0 million contingent
consideration adjustment benefit, a
$0.6 million impairment of intangible
assets and $0.4 million in acquisition
related costs. Non-recurring items
before tax in FY2014 included an
$80.0 million non-cash impairment of
intangible assets, restructuring costs
of $1.5 million, and acquisition and
transition costs of $1.1 million.
Underlying profit after tax, excluding
the non-cash impairment of
intangibles and non-recurring items
was $12.0 million, 16.1% below FY2014.
which are expected to lead to higher
margins in FY2016.
The Company continues to operate a
comprehensive foreign exchange
hedging program, which mitigates the
impact of Australian dollar and US
dollar movements. Estimated US dollar
requirements are hedged eight
months forward on a rolling basis,
using options, forward exchange
contracts and collars. In FY2016 the
company’s exposure to the US dollar
is expected to continue to reduce as a
result of the cessation of unprofitable
private label supply contracts sourced
in US dollars and the continued
growth in Australian sourced Health
and Beauty product.
Total expenses, excluding product
costs, borrowing costs, restructure
costs and non-cash impairment costs,
decreased by $2.0 million or 1.7%,
largely due to a reduction in cartage,
freight and third party warehousing
costs resulting from the change in
product mix and the divestment of the
Housewares business. The percentage
of expenses to sales ratio reduced
from 34.6% of sales in FY2014 to
34.4% of sales in FY2015.
During the past year the company has
transitioned its New Zealand IT
operation to the primary ERP system
used in Australia. Additionally the
logistics function in New Zealand was
outsourced to a third party provider,
removing a significant fixed cost
element from the New Zealand
operation, providing potential for
future improvements in profitability.
Underlying earnings per share,
excluding the non-cash impairment of
intangibles and non-recurring items,
declined 19.5% from 15.4 cents per share
to 12.4 cents per share.
Inclusive of the aforementioned
non-recurring items, McPherson’s
reported a statutory profit after tax of
$8.8 million, compared with a loss after
tax of $67.0 million in FY2014.
Operating cashflow before interest and
tax was $19.5 million, $14.4 million below
FY2014, and represents cash conversion
of 89% of underlying EBITDA. Net
working capital decreased by $3.2
million, with the increase in inventories
more than offset by a decrease in trade
receivables and an increase in trade
payables.
Net debt increased from $74.7 million at
1 July 2014 to $77.2 million at 30 June
2015. The Company’s gearing ratio (net
debt/total funds employed) was 43.9%
compared with 44.6% at 30 June 2014.
The net cash inflow of $7.4 million in
FY2015 included payments totalling $8.1
million for the acquisitions made during
the year and proceeds from the
divestment of business assets of $8.6
million made during the year.
Directors declared a total dividend of
8.0 cents per share fully franked for the
full year. This represented a payout ratio
for the year ended 30 June 2015 of 65%
of underlying earnings per share,
excluding the non-cash impairment of
intangibles and non-recurring items.
Earnings in FY2015 benefited from the
acquisitions of the A’kin and Al’chemy
brands, together with the distribution of
Procter & Gamble’s fine fragrances and
Trilogy. While gross margins declined
during FY2015 primarily as a result of
the depreciation in the Australian dollar,
the Group has implemented price
increases across all product ranges and
negotiated cost decreases both of
REVIEW OF OPERATIONS
(CONTINUED)
*
FY2014 figures have been restated to reflect a change with respect to the timing of recognising revenue and promotional discounts. The impact has been to reduce
sales revenue $0.7m, increase the loss before tax $0.7m, and increase the loss after tax $0.5m.