Patties Foods Arrives

Sydney, Nov 7, 2006 (ABN Newswire) - Patties Foods is the largest of the industrial floats to be confirmed. It's best known as the Four'N Twenty pie company.

It has raised almost $103 million and listed on the ASX yesterday at a small premium of 15c to its issue price of$1.75 each. It closed at $1.92, up nearly 10per cent in yesterday's record market.

That will give Patties a valuation of $266 million and the controlling Rijs Family Trust will retain a 48 per cent stake.

Food companies don't often appear on the ASX. Earlier this year donut and coffee retailer, Retail Food Group listed and has performed so-so with its shares trading under the $1 issue price (around 96c yesterday) for most of its five months on the lists.

Food and Beverage Company tried a float through a company that owned part of the Kirspy Kreme donut brand in Australia and Jesters Pies earlier in the year. That company just couldn't get traction with investors but Patties seems to have done that and landed its listing.

Patties main products are frozen savoury and dessert products. It has grown from its origins as a small cake shop in Lakes Entrance in Victoria, into a company with approximately 425 employees.

Its key assets though are well-known brands (especially in supermarkets) Four'N Twenty, Patties, Herbert Adams and Nanna's. Some of these were owned by Petersville Australia when it had food giant ambitions.

The brands were sold off over the years as the Petersville food assets were traded between various owners.

In the prospectus, Patties Foods forecast a pro forma after tax profit of $16.8 million for the 2007 June year and a 2007 PE of 14.5x.

The company said it expected pro forma sales revenue of $131.5 million and a pro forma EBITDA of $29 million, which would give a gross profit margin of around 22 per cent, which is OK.

The group also expects to distribute a fully franked dividend of 7.2c per share, representing a 2007 dividend yield of 4.1 per cent.

Shaw Stockbroking analyst, Scott Marshall, says Patties Foods is a solid food brand company but looking fully valued in a mature industry. (The likes of Goodman Fielders would be a competitor in some areas.)

Managing director, Richard Rijs, says the capital raising would help the company establish a financial and ownership structure which would facilitate the continued expansion of the company's business and that following the offering, the company would have significant balance sheet capacity to take advantage of both organic growth and acquisition opportunities as they become available.



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