At the webinar, MD?ECO Mr Charlie McLeish commented that only now supplies Duracell batteries to the route trade.
PTL has had three years of solid growth.
PTL has stuck to being 'brand focused', not concentrating on even lower margin private labels.
In the last year, coronavirus issues at NZ ports have affected PTL.
PTL has considered 'files and files' of proposals to acquire
Reckitt Benckiser, SC Johnson and Henkel are competitors, all being foreign owned multinationals. It can compete with these international companies even with price discounting.
PTL becomes sole supplier of bleach to the largest retailer in Oz in September 2021. (Is this WOW - it's the largest supermarket chain).
PTL has developed the technology where more products are manufactured in Shepparton, Victoria not mainland China.
A new range of Softly specialty products will be launched: PTL regards this as better than being just a general laundry products supplier.
CFO Neil Godara said that the EPS in FY 21 was about a 10 per cent return on the share price. "Fantastic" he said.
Costs were kept on a pretty tight leash.
CEO Mr McLeish referred to the hamper business purchased by MBH.
Hampers Emporium is the largest player; HwB (PTL target) is second.
HwB has some 'strong' business customers.
PTL entered into discussions with it from late January 2021. Mr McLeish was initially quite sceptical about growth in hamper sales with 'the virus', but on top of a 200 per cent growth rate last year, that business has had a 70 per cent growth rate so far this year. July and August 2021 hamper sales have doubled compared with a year ago. PTL believes HWB is a good solid business.
Mr McLeish then answered questions from investors.
PTL has developed Bondi Soap products with a standalone ecommerce website, not yet switched on. This will occur prior to integration of HwB purchase, plus also online White King and other 'value packs' (see below for an additional comment). HwB means a ready-made shopper base for PTL to tap in to.
Until recent years, the majority of HwB profit was made in the December quarter (i.e. Christmas). The four faces (two founders and two HwB key staff) shown in the presentation will be working for PTL for at least the next two years, with remuneration including a profit growth program. They've signed employment contracts with PTL.
Mr Godara highlighted how with a direct consumer model of HwB, margins should improve.
The PTL business is in a 'healthy position'. The Duracell forced part distribution divestment gave PTL 'one more reason to go' (i.e. for the HWB deal).
PTL will still have some cash to operate on a day-to-day basis even after the HwB deal.
Given the VWAP for five days prior to the announcement applies to the A$3m scrip component for the vendors, that means no discount to the share price.
There were more questions from investors.
Re the rural city of Shepparton where there have been many coronavirus cases and its factory, Mr McLeish said PTL carries two to four weeks' stock. The Shepparton team has low turnover with a lot of multiskilling. As of today, 20 team members are in isolation on a precautionary step (i.e. implied not directly acquired, or they don't have the virus themselves) but all lines are being manufactured, though there will be some rundown in inventory.
HwB: business to business sales are around a 40 per cent contributor to total margins, while B2 consumers is 60 per cent. (I hope that's what was said: I couldn't hear that point well). Be cautious with using that metric!
In the last 12 months, B2C has been the focus: Valentine's Day, Mother's and Father's Day, Easter and so on. The due diligence went on longer than PTL expected but it gave it a much better 'window' into the business.
HwB has been Victoria-centric but supplies mining company RIO nationally. This means opportunities for growth into other states.
The personal care products that PTL will have in gift packs/'hampers' will service a different market.
The Bondi Soap range will be a '12 month gifting range' (special event days like Valentine's Day). Country Life gift packs might be $35-40 whereas Bondi Soap packs will be $100 plus.
Household cleaning packs may be sold on a 'subscribe for 12 months, get supplied for each month but get two months free'.
With the risk of an economic recession, HwB target from $30 to $400 in shopper online purchase cost, so there's flexibility.
The core PTL business has been around retail bricks and mortar. PTL has however been building the Bondi Soap website that will start in early September, before the integration of HwB. PTL has an employee who has a background in ecommerce (Sportsgirl and The Reject Shop among others). PTL doesn't want to distract HwB too much in the lead up to the busy Christmas season so it will continue with some standalone ecommerce.
Australia Post do the deliveries for HwB with an HwB warehouse in Maidstone, Vic and an office in Fitzroy, Vic.
Packaging and delivery costs: average for the former tends to be $5 but varies with hamper size, while delivery costs tend to be $10. HwB charges for delivery.
PTL and HwB IT systems are not a major issue in terms of differences. There was one requirement for additional licences (software?) identified, plus HwB could do with some more automation.
Mr Godara said in the past year, PTL had often stuck to its strategy of not just competing on price.
With working capital, HwB has to increase its stock, especially prior to Christmas, so it will need up to $4 million in working capital.
Mr McLeish said in respect of ecommerce, we could look at wider trends. 19 per cent of hampers/gifting/personal care online sales are about 19 per cent of total category sales in the USA, 12 to 13 per cent in the UK and five to six per cent in Oz.
Apart from alcohol, HwB uses its own brands. Its hampers can be affordable.
With the earnout (reliant on achieving NPAT of a certain amount in FY22), HwB vendors are prepared to hold long term and will become one of the larger holders with c. six per cent of issued capital but they haven't specified a particular earnout percentage they'll take in shares (i,e. the earnout is at a later date than the initial holding they receive when PTL purchases HwB).
Integration of the IT systems will occur in the next nine months.
Director of PTL Fred Harrison (runs Ritchies IGA supermarkets) has had experience in 60 acquisitions while Chairman Mark Hardgrave had his own M&A business, while Mr McLeish had a two year involvement at George Weston Foods in acquiring another business.
The PTL project team for HwB keeps the Board updated.
Directors who hold scrip have committed to subscribing through the SPP. (I assume $30000 each but this was not stated).
Originally PTL was aiming to have the HwB acquisition done and dusted two to three months ago. New shareholders will be eligible for the 1.6cps final dividend announced today.
It was pleasing that many questions were answered.
This has allayed some of my concerns, although as a worry wort I'm still concerned about a recession and obviously none of us have a window into whether the purchase price accounts for that.
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