Patties Foods : Full Year Results Announcement (Link)

Patties Foods Ltd‌‌‌ ABN 62 007 157 182 Operations Corporate Office 161-169 Princes Highway Chifley Business Park Bairnsdale VIC 3875 Level 2, 1 Joseph Avenue PO Box 409 Mentone VIC 3194 Bairnsdale VIC 3875 PO Box 115
Phone: Admin Fax: Sales Fax: info@patties 19 August 2016 www.patties.	03 5150 1800 Dingley VIC 3172 03 5152 1135 Phone: [phone] 03 5152 1054 Fax : [phone] .com.au [e-mail] com.au www.patties.com.au

Announcements Officer ASX Limited

South Rialto Tower 525 Collins Street

MELBOURNE VIC 3000 Patties Foods Limited (PFL) - Results for announcement to the market - Year ended 30 June 2016

The following information in respect of the year ended 30 June 2016 is transmitted for lodgement:

1. Year end report announcement

2. Appendix 4E - Preliminary Final Report and Dividend Announcement for the year ended 30 June 2016

3. Appendix 4G - Key to Disclosures - Corporate Governance Council Principles and Recommendations; and

4. Directors' Report and Financial Report for the year ended 30 June 2016. Yours faithfully

CLINTON ORR

Company Secretary

For further information refer to www.patties.com.au or contact either: Steven Chaur

Managing Director and Chief Executive Officer 03 8540 9100

Robin Donohue

Chief Financial Officer 03 8540 9100

FULL YEAR RESULTS ANNOUNCEMENT Core Bakery business EBIT grows +15.1% as Patties Foods Innovates and exits Frozen Fruit

The Board of Patties Foods Limited (PFL or Company) today announced the Company's financial result for the year ended 30 June 2016 (FY16).

Group Summary Result

$m	FY16	FY15	% Change
Sales Revenue	$245.1	$256.9	-4.6%
- Core Bakery (1), excluding Frozen Fruit	$233.5	$223.4	+4.6%
EBIT - Reported	$21.1	$9.1	130.8%
- Underlying (2)(3)	$22.4	$23.8	-6.0%
- Underlying Core Bakery, excl Frozen Fruit(1)(2)(3)	$25.4	$22.1	+15.1%
NPAT - Reported	$13.0	$2.1	533.2%
- Underlying (2)(3)	$14.1	$15.4	-8.7%
- Underlying Core Bakery, excl Frozen Fruit(1)(2)(3)	$16.5	$14.5	+13.6%
EPS (cents)	9.3	1.5	522.7%
DPS (cents)	2.7	5.0	N/A
Cash Inflow from Operations	$27.2	$5.3	416.5%
FY16	FY15
Net Debt	$60.3	$74.2
Net Debt to Equity ratio (4)	44.5%	54.7%

Isolating the now exited Frozen Fruit business, core Bakery sales revenues performed solidly growing at 4.6% (+$10.1m) (1). This growth was fundamentally due to stronger sales in our iconic savoury brands in a competitive market. In December 2015, the Company announced its exit of Frozen Fruit and the sale of the Creative Gourmet brand.

Allowing for a significant item of -$1.3m pre-tax (-$1.1m post-tax) relating to costs incurred from the Scheme of Arrangement, the underlying core Bakery EBIT (excluding Frozen Fruit) was $25.4m and a

+15.1% on FY15. Significant items in FY15 were -$14.7m pre-tax and -$13.4m post-tax.(2) Particularly encouraging was the increase in underlying bakery EBIT in the second half of financial year of +25.0%, compared to +7.2% in 1H16.

Reported Net Profit After Tax (NPAT) was $13.0m vs $2.1m in FY15 and on an underlying basis (excluding Frozen Fruit), NPAT was $16.5m(2).

Following execution of the Scheme Implementation Deed announced in June 2016, the Board does not propose to consider declaring a final dividend. If the Scheme is approved by the Patties Shareholders and by the Court, the Board may consider the declaration and payment of a special dividend of up to and including $0.25 per share which is expected to be fully franked. (7)

Commenting on the results, Chairman, Mr Mark Smith said:

"The solid and increasing underlying 15.1% EBIT growth of our core Bakery business is very pleasing given our increased investment in brand marketing and product innovation. The decision to comprehensively re-structure the business 12 months ago continues to deliver effective cost control and operational efficiency improvements.

The strategic decision to exit the Frozen Fruit category is now complete and accordingly the business continues to concentrate on driving its profitable core Bakery business and importantly iconic food brands such as FOUR'N TWENTY, Patties, Herbert Adams, Nanna's and Chefs Pride".

Managing Director and CEO, Mr Steven Chaur said:

"Our core bakery business continues to perform solidly over the past 12 months through our focussed strategy in delivering premium savoury innovation, creating customer differentiation, operating a leaner organisation and achieving Continuous Improvement programs in the Bakery.

Our brands continued to exceed the market growth in all sales channels, with Patties growing revenue +6.2%, FOUR'N TWENTY +13.2%, Herbert Adams +11.6% and Nanna's +12.2%.

Overall our bakery business grew at +4.6%, offsetting a revenue decline of -19.4% in our contract manufacturing business against the prior year as the Company chose to exit two unprofitable Private Label contracts. Positively, these contract exits were offset with improved operational performance and branded sales of higher margin new products.

Over the financial year, management worked diligently to mitigate the residual effects of the February 2015 Frozen Berries recall. As at the end of June 2016, Patties Foods had practically exited all its remaining frozen berries stocks and successfully transitioned Creative Gourmet.

Patties Foods continues to grow its share of the competitive savoury pastry market in all sales channels. In the In-Home grocery channel, branded business has grown to over 52% market share of the $295M Total Frozen Savoury category(6), with all our brands growing their respective segment share. In the Out of Home channel, Patties Foods has now grown to 64% share of the important Petrol and Convenience (P&C) channel, which grew at +10.1% to $125M(6) in FY16.

During FY16, the Company launched a range of exciting new products and campaigns, in particular driving our branded first to market innovation advantage with leading sous vide technology.

• The Patties brand, which is celebrating its 50 year birthday in 2016, grew revenue +6.2% overall driven by a strong +11.4% growth in In-Home sales through unique new products such as mini pizzas, a Cheeseburger party pie and a vibrant new packaging makeover. Foodservice launches included two new sous vide slow cooked party pies and new savoury finger foods.

• Our premium Herbert Adams brand continues to be an industry success, with the launch of a first to market range of sous vide slow cooked meat pies. Range extensions include new premium flavours such as Smoky Pulled Pork, Lamb and Rosemary, RSPCA Chicken & Chorizo and two party pie offers. In In-Home, the brand has extended into the chilled foods segment with a range of premium single box slow cooked pies. The brand now commands 15% value share of total supermarket frozen savoury sales and continues to grow strongly at +21.6%.

• FOUR'N TWENTY: the launch of the new sous vide slow cooked "Real Chunky" pie range in the P&C channel accelerated brand growth to become market leader and grew the brand's Out of Home revenues by an impressive +20.3%. Grocery launches included a new sous vide 'Super Chunky' pie range, a limited time Cheeseburger pie offer and an Australia shaped party pie for Australia Day helping to grow brand revenue +7.1% in the sales channel.

• Chefs Pride in 4Q16 has launched a new range of 9 premium sous vide slow cooked protein based meal solutions targeted at the catering sales channel. The new range also includes an innovative 'snip and serve' range of 7 premium ready to serve meat pie fillings targeted at the high street 'scratch' bakery market. Early sales to foodservice distributors have been very positive.

  Over the past 12 months the Bairnsdale bakery continued to make key capital investments and deliver solid performance improvements. Key highlights include a significant reduction in inventory, improved production reliability, increased consumer satisfaction and safety LTIFR reduced by -50%.

  Further Highlights for FY16 were:

• Year end total debt position of $60M is the lowest level since 2011

• Cash Flow from Operations improved to $27.2M, a net improvement of $21.9M vs FY15

• Total Inventory reduced to $35.5M compared to $49.9M in F15, a reduction of -$14.4M driven by the exit of Frozen Fruit, improvements in core Bakery performance and lower meat inventory

• The Company successfully launched 46 new savoury products over the past 12 months

• The strategically important Out of Home market channel has now grown to 38% share of total Company revenues compared to 34% last year

Capital Management

The Company improved its balance sheet profile with a net debt to equity ratio (4) of 44.5% at 30 June 2016 (54.7% at 30 June 2015).

Total cash flow generated from operations in FY16 improved to $27.2m compared to $5.3m in FY15. Net Debt of $60.3m also improved against $74.2m as at 30 June 2015.

Underlying Return of Equity(5) was 10.6% (FY15: 11.4%) which we anticipate will improve following the exit of Frozen Fruit and the more streamlined focus on our core Bakery business.

Dividend(7)

Following an interim dividend of 2.7cps, the Board does not propose to consider declaring a final dividend as it has entered into the Scheme Implementation Deed. If the Scheme is approved by the Patties Shareholders and by the Court, the Board may consider the declaration and payment of a special dividend of up to and including $0.25 per share which is expected to be fully franked. (7)

Scheme of Implementation Deed

Patties Foods Limited has previously announced and sent to its shareholders an Explanatory Booklet in relation to the previously announced Scheme of Arrangement with ASIC for the proposed acquisition of Patties by Australasian Foods Bidco Pty Ltd (Scheme) and convening of the Scheme Meeting of Shareholders. The terms of the proposed Scheme are as announced to ASX on 2 June 2016.

An Independent Expert's report, prepared by Deloitte Corporate Finance Pty Limited (Deloitte) has concluded that, in the absence of a superior proposal, the proposed Scheme is fair and reasonable and therefore is in the best interests of Patties shareholders.

Your Directors continue to unanimously recommend that Patties shareholders vote in favour of the Scheme at the upcoming Scheme Meeting, in the absence of a superior proposal. Subject to that same qualification, each Patties Director intends to vote all Patties shares held or controlled by him in favour of the Scheme.

The Scheme meeting is to be held at 10:00am on Friday, 26 August 2016 at Minter Ellison, Level 23, Rialto Towers, 525 Collins Street, Melbourne, Victoria. All shareholders are encouraged to vote either by attending the Scheme Meeting in person, or by lodging a proxy vote by 10.00am on Wednesday, 24 August 2016.