FLLYR: PGW: FY2019 a transformation year for PGG Wrightson 08:30a.m. 
13/08/2019 08:30  
REL: 0830 HRS PGG Wrightson Limited  
FLLYR: PGW: FY2019 a transformation year for PGG Wrightson  
13 August 2019  
FY2019 a transformational year for PGG Wrightson  
Financial Performance and Business Transformation  
PGG Wrightson Ltd* (PGW) announced for the year ended 30 June 2019 a full  
year operating earnings before interest, tax, depreciation and amortisation  
(Operating EBITDA)** of $24.4 million (FY2018 $34.5 million) and a record net  
profit after tax (NPAT) of $131.8 million (FY2018 $18.9 million).  
PGW Chairman Rodger Finlay said, "FY2019 has been a transformational year for  
PGW, both for the business and shareholders. The change brought about by the  
sale of the Seed & Grain business completed on 1 May 2019 was significant for  
PGW with the proceeds from the transaction paving the way for a capital  
distribution to shareholders of approximately $234.0 million."  
"Our strategic relationship with the new owners of Seed & Grain, DLF Seeds  
A/S, is a positive one. While this deal has been transformational for PGW,  
it remains very much business as usual for our frontline staff and our  
customers. We will continue to work closely with the PGG Wrightson Seeds  
team to bring their products to our customers, and the seed category will  
continue to be profitable for our retail business."  
"Reflecting on FY2019 I think we can say it was one of the most operationally  
challenging of recent years. Farmer confidence in parts of the agriculture  
sector remains subdued, constraining farm spending and therefore our revenue  
growth over the year. This has also been evident in recent months with a  
discernible tightening in the credit environment. This has seen a small  
increase in our overdue debtors and increased provisions taken at year-end  
for doubtful debts. Nevertheless, we've chosen to continue to invest in and  
build our business as we plan for farm spending to recover. Notably we've  
increased the pace of our IT spend as a number of key projects are being  
implemented. As a result, PGW finished the year slightly under the lower end  
of our Operating EBITDA guidance range of $25.0 million. On the other hand,  
net profit after tax benefited from the capital gain on sale of the Seed &  
Grain business and at $131.8 million is a record result for PGW," said Mr  
PGW Chief Executive Stephen Guerin added, "In our announcement on 9 May 2019  
we indicated that we expected to end the financial year near the bottom of  
our Operating EBITDA guidance range given that we were cautious about trading  
conditions through the last quarter. As is often the case, on farm  
conditions have had an influence on performance in the sector and in turn  
PGW, and FY2019 was no exception."  
"The impact of Mycoplasma bovis (M bovis) was felt across the Livestock and  
the Rural Supplies businesses. Most particularly with reduced dairy herd  
settlements, a reduction in tallies, a softening of demand for dairy beef,  
and a more cautious approach to spending in the dairy sector across a range  
of farm inputs. Market conditions continued to challenge both our Real  
Estate and Wool businesses with results down on last year.  
"It is important to note that this Operating EBITDA result no longer includes  
any contribution from the Seed & Grain business which has been reported as a  
discontinued operation in our results for FY2019 and the comparative year."  
Retail & Water  
"Operating EBITDA was back $4.2 million on the record result of FY2018. The  
strong performer within this group continues to be Fruitfed, who along with  
Agritrade increased its Operating EBITDA result on last year. Market  
conditions for the horticultural sector remained positive despite some  
adverse conditions at key pollination, growing and harvesting periods. The  
development of orchards and vineyards around the country continue to drive  
revenue growth for Fruitfed."  
"A factor in the reduction in Operating EBITDA for the group was a claim  
event noted in our half-year results in February 2019. A settlement was  
reached with our supplier that partially compensated PGW for the consequences  
arising from the supply of the defective product with a financial impact of  
approximately $1.8 million that was not recovered. In addition, higher  
petrol prices over the year also impacted earnings in Retail & Water along  
with other parts of our business."  
"The rollout of our new retail point of sale system in the first quarter of  
FY2019 is an important milestone in our larger e-commerce programme that  
reflects the group's focus on technology applications in the business."  
"Our Agency business incorporates the Livestock, Wool and Real Estate  
businesses, as well as our referral commissions for insurance and finance  
services. Trading for this group is weighted towards the second half of the  
financial year. Agency's Operating EBITDA was back $4.7 million on last year  
with all businesses continuing to be impacted by the market conditions  
throughout FY2019."  
"Livestock was down on earnings at the half year mark and did not recover to  
the extent expected over the second half despite strong sheep and beef  
commodity pricing and demand. The finishing of sheep and cattle was delayed,  
with many farmers holding onto stock through until the late-autumn and into  
the winter months. In addition, the effects of M bovis were felt across the  
sector and impacted dairy herd settlements and farmers trading dairy beef."  
"Innovation remains a focus for the Livestock team with a major project  
coming to fruition during the year. PGW's new online livestock trading  
channel, bidr(R), was delivered to market during the last quarter of FY2019.  
In addition, digital tools for our highly mobile Livestock team were  
delivered to keep agents up to date with the latest market intelligence."  
Cash Flow and Debt  
"Total group cash flows were $199.6 million which predominantly relates to  
the cash received for the sale of Seed & Grain, leaving us with a cash  
balance of $210.5 million by 30 June 2019.  
"Net cash flow (including the Seed & Grain business) from operating  
activities was a $49.0 million outflow. This results from investments in  
working capital including investment in Go livestock products of $8.3  
million. In addition, lump sum funding payments of approximately $10.3  
million were made to the group's Defined Benefit Pension Scheme (Plan) to  
bring the Plan into actuarial equilibrium in June 2019."  
"PGW negotiated and entered into new bank facilities in July 2019 providing  
for core facilities of up to $50.0 million and a working capital facility of  
up to $70.0 million. It is pleasing to note that very competitive terms have  
been struck for these banking arrangements and this further underscores the  
confidence in the fundamentals of the business and PGW's future."  
Corporate Structure Review  
"Following the divestment of the Seed & Grain business in May, the PGW Board  
commenced a review of the corporate service model for the business. Outcomes  
from the review are now being implemented in a staged manner as we  
recalibrate our corporate structure to capture efficiencies while also  
configuring our back office to best serve our customers and our re-sized  
operation. We expect to see the benefit of cost savings flow through  
progressively with savings in excess of $2.5 million expected in FY2020,"  
said Mr Guerin.  
Outlook and Dividend Declaration  
Mr Finlay continued, "as noted earlier, with the transformational change that  
PGW has undergone over the last 12 months, we believe that we are positioned  
well for the current financial year and beyond. But with only six weeks of  
trading to date it is too soon yet to get a sense for trading performance in  
the first half of FY2020."  
"The impact of M bovis on dairy and beef and uncertainty regarding regulatory  
change affecting agriculture is impacting confidence levels in the rural  
sector. We are seeing a more cautious approach to investment and expenditure  
from our customers."  
"With continued strong global demand for protein, and as livestock farmers  
and the wider industry gain a better understanding and increased confidence  
in the management of M bovis, we believe we will see the positive effect of  
those factors flow through into improved trading. We are also buoyed by the  
ongoing confidence in the horticulture sector and we anticipate that the  
Fruitfed business will continue to go from strength to strength as this  
sector grows."  
"Whilst it is too soon to provide firm guidance about expectations for  
FY2020, the Board considers that post implementation of the corporate  
restructuring, and assuming a more normal trading year and continuing  
confidence in commodity prices, we expect to see PGW achieving Operating  
EBITDA in excess of $30.0 million (before adjusting for the impact from the  
new accounting standard for leases: IFRS16)."  
"Based on this confidence, the Board has declared a fully imputed dividend of  
7.5 cents per share, which will be paid on 2 October 2019. This will  
effectively bring the total fully imputed dividends paid for the year to 15.0  
cents per share on a post share consolidation basis."  
"We will be in a better position to provide FY2020 guidance at the time of  
our Annual Shareholders Meeting in October when we have seen the start of the  
busy spring trading period."  
"With the Seed & Grain transaction and the capital return behind us, we are  
sharpening our focus on the core PGW offerings that have made the business a  
key part of the New Zealand agricultural landscape for more than 160 years.  
The Board and management team will be reassessing our strategy and exploring  
opportunities to innovate and grow our business as we continue to demonstrate  
to our customers why PGW is their preferred partner for their agri-business  
Governance Changes  
"Ronald Seah has informed the Board of his intention to retire effective on  
31 August 2019. Ronald joined the Board in December 2012 and has diligently  
served the company as an independent director for a little under seven  
"Ronald is pleased to have held office through to the successful conclusion  
of the Seed & Grain transaction and capital distribution. The Board offers  
its sincere thanks to Ronald for his leadership and dedication since his  
appointment as a director and wishes him all the very best for the future.  
We consider that the Board has an appropriate mix of skills going forward  
with five directors inclusive of three independent directors. Accordingly,  
the Board does not intend to make any further appointments following Ronald's  
retirement at the end of the month." Mr Finlay said.  
For all media enquiries please contact:  
Linda Chalmers  
PGG Wrightson Group Communication and Brand Manager  
Phone: +64(0)27 405 3241  
*All references to PGG Wrightson Limited or the Group refer to the Company,  
its subsidiaries and interests in associates and jointly controlled entities.  
**Operating EBITDA: Earnings before net interest and finance costs, income  
tax, depreciation, amortisation, the results from discontinued operations,  
fair value adjustments and non-operating items.  
PGW has used non-GAAP profit measures when discussing financial performance  
in this document. For a comprehensive discussion on the use of non-GAAP  
profit measures, please refer to the policy "Non-GAAP Accounting Information"  
available at  
End CA:00338977 For:PGW Type:FLLYR Time:2019-08-13 08:30:52  

Click here to view related attachments.