E-commerce acquisition adds new dimension for Pental
Manufacturer and distributor of consumer goods, Pental Limited is set to bolt on at least $24 million in existing revenues and plenty of blue-sky revenue opportunities after moving to acquire e-commerce business, Hampers With Bite. Pental will add the burgeoning gift hamper business to its lucrative and growing stable of big-name brands that it distributes or owns including household names like Huggie, White King, Jiffy, Velvet, Softly and Duracell, to name just a few.
Pental largely operates a traditional wholesale distribution model for its existing products in Australia, New Zealand and Asia where it distributes to major retailers and others.
Whilst Hampers With Bite comes gift wrapped with an impressive unaudited FY21 EBITDA of over $5 million, it is its e-commerce channels and back-end infrastructure that has really caught Pental’s eye as it seeks to turbocharge its distribution model.
Pental recently delivered some stellar numbers in its full 2021 financial year results including revenues of $125 million against a net profit after tax of $5.61 million, up an impressive 11.7 per cent on the 2020 financial year.
Underlying basic earnings per share recorded a similar rise of 11.85 per cent to clock in at 4.12c a share, whilst underlying EBIT rose by more than 10 per cent to about $8.15 million.
Pental will pay out a 2.6c per share dividend for FY21 representing an 18 per cent hike on the previous financial year – the addition of Hampers With Bite’s impressive bottom line to Pental’s already solid financials will no doubt make for an interesting set of financial metrics for FY22.
Pental says around 79 per cent of its sales, not including batteries, in the 2021 financial year were derived from large supermarkets and grocery stores. Distributors, discount stores, pharmacies and other alternative channels combined for another 14 per cent of sales volumes. Large retail, hardware, foodservice and export markets took in the remaining seven per cent.
The acquisition of Hampers With Bite will enable Pental to diversify its existing sales channels and fast-track its e-commerce-led growth strategy aimed at reducing its reliance on supermarkets.
Founded in 2004, Hampers is a Melbourne-based online hamper and gifting specialist selling a range of products targeted toward gifts for friends, family and corporate clients.
Hampers runs both a business-to-business and business-to-consumer model. It supplies gift hampers and food and wine hampers to its customer and consumer database through a combination of own brand and high margin third party products.
The 17-year-old business has grown from generating some $10 million in revenue in the 2019 financial year to a stellar $24 million in the 2021 financial year.
Pental says that Hampers’ ‘direct to consumers’ business model enables higher gross profit margins compared to Pental, estimated at 58 per cent for the 2021 financial year.
After taking the acquisition of Hampers into account, Pental’s total combined gross profit margin is projected to lift from about 27 per cent to around 32 per cent post the purchase.
Management estimates that total combined group pro forma net sales revenue for the 2021 financial year will rise to $148.9 million after the acquisition has been completed.
Importantly, the combined group pro forma underlying EBITDA is predicted to touch $17.1 million post acquisition.
Interestingly, the Hampers With Bite vendors are on an earn-out with Pental that will see them potentially pick up another $4 million if Hampers can achieve an EBIT of $6.3 million in FY22.
The potential earn-out will be in addition to the $21.3 million in cash and $3 million in shares already paid by Pental.
Pental believes Hampers’ established online sales channels could provide “transformative” growth potential and meet its objective of reducing reliance on lower margin supermarket revenues.
That Hampers With Bite already has an established and successful e-commerce platform is no coincidence and represents potentially the next phase of serious growth for Pental.
Pentals says it has also identified opportunities to “cross-sell” its own products and bundles via Hampers’ online platform, whilst also tapping into the existing customer base of the uber-successful Melbourne-based gifting specialist.
Hampers also brings to the party established direct-to-consumer distribution infrastructure that includes a strategically located delivery centre close to Melbourne’s CBD. Pental will look to benefit from Hampers’ supply route by providing same day delivery options to its consumers, whilst also improving its delivery efficiency.
Pental also sees synergies between the two companies in product research and development. Management says that fusing Hampers’ new product development proficiency with its own research and development arm could sprout new and innovative offerings.
Pental Limited Managing Director, Charlie McLeish said: “Our acquisition of Hampers will transform Pental by boosting our financial scale and delivering new capabilities which are highly complementary to our existing business.”
“Through this deal we are welcoming a highly experienced team of e-commerce professionals who have turned Hampers into a market leader. Beyond its e-commerce infrastructure and expertise, Hampers brings us enhanced and efficient distribution capabilities which will allow us to offer customers very convenient delivery options. What’s more, the Hampers business will boost our group revenue by approximately 20 per cent and immediately strengthen the company’s profitability.”
Hampers provides its customers with 88 standard hamper options ranging in price from $28 to $400 per hamper. Its own branded label products cover more than 60 per cent of its merchandise range, with that number targeted to rise to 80 per cent by the end of the year.
The business sold more than 375,000 hampers in the 2021 financial year with some 73 per cent in a business-to-business setting.
Hampers list more than 4,200 business-to-business customers amongst its client base and already boasts key corporate customers that include Telstra, Rio Tinto, Qantas, NAB, Coca Cola, Commonwealth Bank, ANZ, Officeworks and Toyota.
Its digital presence extends to more than 134,000 email subscribers and over 16,000 Facebook followers, with Instagram followers numbering more than 10,000.
Notably, Hampers clocked up over one million website visits in the last financial year, an increase of 110 per cent on 2020.
Pental is an interesting beast. It has been quietly collecting some big-name household brands since its founding in 1954. Today, its repertoire of product offerings span household, fabric, personal care and fire needs.
The company’s brands can be traced back for decades in Australian consumer history as evidenced by White King, Australia’s quintessential household cleaning product since 1950.
Other familiar names falling under Pental’s umbrella of Aussie brands include Sunlight, Country Life and Little Lucifer - all commonly found on the shelves of major retailers such as Woolworths, Coles, Aldi, Kmart, BIG W, Officeworks and Chemist Warehouse.
Headquartered in Melbourne, Pental today remains the largest Australian manufacturer of bar soaps, liquid bleach and firelighter cubes. The company boasts its own manufacturing plant in Shepparton, Victoria, where it also operates a cutting-edge distribution centre.
It also manages brands for other companies with its services covering manufacturing, distribution, customer relations, sales and marketing for third party businesses.
As a dividend paying distribution business with a solid back end and distribution network, Pental just needs to get its purchasing metrics right and could easily continue to bolt on value accretive businesses to its operation.
Hampers With Bite looks to be a good fit and comes gift wrapped with a serious bottom line in its own right and a whole new e-commerce marketplace for Pental to test drive without the hassle or expense of doing it from scratch.
Is your ASX-listed company doing something interesting? Contact: matt.birney@businessnews.com.au