Ann: Appendix 4E and 2024 Consolidated Financial Report, page-6

PGH FY24 results

Results look quite good v FY23 but are complicated by the accounting changes for the 50% sale of Crates mid year.

During FY24 Pact did not provide any profit guidance, so I checked how the actual FY24 results compared with any “forecasts” in the takeover Target Statement. However, there were no such forecasts. Kroll’s expert report partly based its valuation on “consensus” earnings forecasts from only two (unnamed) brokers, which were therefore of limited reliability. PGH itself used vague comments like:“1H24 has been consistent with management’s [unstated] expectation” in Update of 6 February 2024; and (on 20 May 2024) “Pact trading update to 30 April 24 ..Pact remains on track to deliver FY24 Underlying EBIT in line with [unstated] consensus. “

Underlying FY24 NPAT was flat at $44.9m. On FY24 average shareholdersfunds of $441m that is a return on equity of 10%: not bad but could be better.

Statutory earnings per share were 21.7c v minus 1.9c in FY23. Underlying eps [my calculation] were flatat 13.0c for both years. The 84c takeover price equates to a PE of 6.5x the underlying eps, which is very low. Thesenumbers vindicate the view of minority holders that a fair price would have beenabove $1.20.

PGH earlier “stated its target is to achieve Gearing of 2.5x by 30 June 2024. This target was dependent on certain assumptions…. Pact now expects Gearing of approximately 2.8x at 30 June 2024.” Actual resultwas better, at 2.5x, but is still high especially when the extra gearing due toleases is included.

		30 June 2024	30 June 2023	30 June 2022
1	Gearing	2.5x	3.0x	2.7x
2	Gearing including leasing	3.7x	4.0x	3.6x
3	Interest cover	3.7x	3.3x	8.0x*
4	Interest cover including leasing	3.2x	3.6x	5.3x*

Gearing is (debt –cash) divided by rolling 12 months underlying ebitda, and- in the second line- is adjusted for lease liabilities and leasing costs. PGH makes heavy use of leasing and it is more appropriate to use the gearing and interest cover figures including leasing; these are more realistic but less favourable.

* The Kroll expert report commented that those ratios in 2002 were abnormally high (i.e. good) because of unusually low interest rates and other one-off reasons.

Net current assets at June 24 were negative at $480m- $538m = minus $58m. I would prefer this to be a positive figure: it would have been but for PGH selling its trade debtors into a securitisation program (see Notes 2.1 and 6.6 which show $137.6m of receivables had been sold into the program at 30 June). If the assets and the corresponding liabilities had been reinstated to PGH’s balance sheet, the net current assets would have been OK at about +$80m, but (non-current?) borrowings $137m higher, which would have increased the two gearing measures above by about 0.4x.

AR P47 says that PGH hedged only 12% of its floating rate borrowings (excluding securitisation) which suggests that they expect interest rates to fall. Their examples indicate that PGH has about $540m in net floating rate borrowings, which is surprisingly high.

Target Statement said “Pact hasguided FY24 capital expenditure to be… $85m, lower than FY23 capex of $130m”. Actualamount was $116m.

Franking credit balance is 8.1cents per share, but PGH has chosen not to pay a dividend. Given RG’s position I expect it won’t pay divs while there are still minority holders.

Remember that PGH will still have an agm- so turn up andask questions!

GLAH. DYOR. Not advice. I have only spent 3 or 4 hours looking at the results- deeper analysis is needed.