Pental Ltd (ASX:PTL) remains strongly positioned to drive continued profitable growth with a healthy balance sheet, strong and increasing brand recognition and an export and e-commerce strategy that provides significant upside.
It entered FY22 with A$12.7 million in net cash and effectively zero debt: a strong balance sheet providing capacity to fund its growth strategy.
The branded home and hygiene product developer said 2022 would be about organic growth following two key e-commerce acquisitions – leading e-commerce hamper and gifting business Hampers with Bite Pty Ltd and Bondi Soap, which recently launched as an online range of products.
Further, the company’s tight focus on efficiency drove the continued margin expansion and underlying 11.7% net profit after tax growth in FY21.
The company’s strong financial and operating performance, coupled with a robust balance sheet, has positioned Pental well to return capital to shareholders via fully franked dividends, while retaining sufficient balance sheet flexibility to accelerate growth.
Strong FY21
Pental managing director Charlie McLeish, said: "We are pleased to deliver a strong FY21 result to our shareholders, especially given the challenges we faced during the year in some of our distribution channels.
“We have continued to focus on our strengths and have continued to reduce our production costs to remain competitive.
“We have done this while remaining proactive in both expanding our portfolio of trusted shelf-stable branded products and seeking to deploy the working capital we unlocked late in FY21 towards a strategic acquisition."
Hampers with Bite to transform Pental
McLeish continued: “I am delighted to report that our acquisition search has been successful, and I welcome Hampers with Bite (HWB) to our group.
“HWB will transform Pental by boosting our financial scale and delivering new capabilities, which are highly complementary to our existing business."
Completion of the acquisition of the leading e-commerce hamper and gifting business will boost Pental’s financial scale and deliver new capabilities, which are highly complementary to Pental’s existing business.
Full consideration price of A$21.3 million in cash and A$3 million in Pental shares has been paid. The only remaining payment is an earn-out payment, which is subject to Hampers with Bite achieving an EBIT of A$6.3 million during the FY22.
The Melbourne-based online hamper and gifting specialist has grown from an around A$10 million revenue business in FY19 to around A$24 million in FY21, with an expected EBIT of A$5.1 million.
Pental believes this acquisition brings many opportunities through an online channel customer base, improved scale, e-commerce expertise, revenue synergies and new product capabilities.
Surge in demand for germ-killing products
Pental maintained healthy momentum throughout FY21 with a surge in demand for its strong germ-killing products during the first wave of the COVID-19 pandemic.
It continues to support its own trusted brands such as White King, Janola, Country Life and Softly with strong above-the-line investment.
Pental maintains a stronghold in market share across many segments including White King in liquid bleach segment, Jiffy in firelighters and Softly in wool wash segments maintaining their number one position.
These and other initiatives led to significant growth in demand for Pental's Jiffy firelighters, further boosted by the launch of two new innovative scented firelighter products.
White King branded sales grew by a healthy 11.9% in the FY21, despite the company not participating in deep price promotions.
New product development
Pental continues to invest into its product innovation pipeline with a particular focus on sustainability.
The company is making advances in assessing the viability of alternative raw materials and packaging that are sustainable and environmentally friendly.
As products with a unique point of difference have been a strength for Pental, the company has successfully launched several new innovative products during the year, including two variants of Jiffy scented firelighters, toilet gels with additional stain removing capability, enzyme-based stain removers for laundry and specialised laundry cleaning products.
Leveraging its production strength and available capacity, Pental continues to explore and expand its offering of contractually manufactured products including private label products for leading retailers.
Export partners
Pental plans to enhance its export footprint in New Zealand, China and other Asian markets.
It will continue new product development for Asian market demands and sustainable growth as well as explore new international opportunities such as Vietnam and Singapore, among others.
The company also plans to continue working with major distributors in China – Jiangsu and Silverstone – to increase demand through product awareness campaigns.
Further, it plans to drive sales with Australian-made and Australian-owned platforms.
FY22 marketing plans
Pental will continue to focus on its mass reach digital marking campaigns and commence its e-commerce sales strategy via its core brands.
It will also prioritise quick-to-market, innovative NPD and focus on improving White King and Country Life’s shelf positioning in major grocery outlets.
It will develop channel-specific product ranges to grow General Trade channels and enter the general-purpose segment via White King NPD and capitalise on White King’s share of bathroom cleaners through range extension.
It will also sustain its current branded market share growth throughout FY22.
Strategic outlook
The company will continue to deliver on its five strategic priorities:
➢ Driving sales growth through key brands;
➢ Developing new products and sales channels;
➢ New projects and acquisitions;
➢ Expanding export markets; and
➢ Continuous manufacturing improvements. This includes new costs out/down initiatives in FY21/22 and continued focus on improving productivity.