Announcement
HALFYR: PGW: PGW announces positive earnings and dividend increase
08:30am
PGW
26/02/2020 08:30
HALFYR
PRICE SENSITIVE
REL: 0830 HRS PGG Wrightson Limited
HALFYR: PGW: PGW announces positive earnings and dividend increase
Group Operating Performance
PGG Wrightson Limited ("PGW")* announced today that the company has recorded
a pleasing first half result and is positive about its trading performance.
Chairman Rodger Finlay reported that Operating EBITDA** for the six months to
31 December 2019 was $34.5 million, showing strong improvement over the
comparative period. This includes the impact of the new accounting lease
standard which has led to an increase in Operating EBITDA of $10.9 million.
Excluding the new lease standard, Operating EBITDA at $23.7 million was 33%
higher than the comparative period.
PGW delivered a net profit after tax (NPAT) of $12.8 million from continuing
operations.
Mr Finlay said, "These results have been driven by strong performances in our
Fruitfed Supplies and Livestock businesses, as well as a continued focus on
reducing costs with the benefits of the restructure starting to materialise
and flow through into our reporting. We have resized our overhead structures
to fit the business and we will continue to look for efficiencies in our
operations on an ongoing basis. As part of this ongoing commitment to
recalibrate our cost base, the Board has resolved to capture savings through
trimming the Board to five members and cutting some director fees. The
combined effect of these changes will result in director fee levels reducing
by approximately 18% when calculated on an annualised basis."
"Taking into account the positive performance of the business the Board has
resolved to pay a fully imputed interim dividend of 9 cents per share (a 20%
increase from the interim dividend payment in 2019 on a post share
consolidation basis) on 3 April 2020 to shareholders on PGW's share register
as at 5pm on 6 March 2020."
Trading Performance
Agency
Trading in the first six months of the financial year was strong by
comparison to the previous year. This was assisted by generally conducive
farming conditions across large parts of the country and a mild spring that
saw good feed in most regions. Commodity pricing for lamb and beef held and
remained high compared to historical levels. This has been welcomed by sheep
and beef farmers as commodity pricing has been driven by strong demand from
China.
Confidence in the dairy sector remains subdued with access to bank funding
having become more constrained together with increased environmental and
regulatory pressures creating a degree of uncertainty for dairy farmers.
PGW Chief Executive Officer, Stephen Guerin commented that "There has been
impressive growth in PGW Livestock's innovative Go livestock programmes. The
Go programmes were only launched as a pilot in 2015 and in December 2019 the
millionth lamb was purchased. There has also been equally notable growth in
our Go-Beef counterpart. The investment in the Go range at 31 December 2019
was $38.6 million, compared to $31.0 million last year. Go is an excellent
example of how PGW can innovate and develop products that meet the needs of
our customers."
Our Wool business traded solidly for the period with Operating EBITDA
(excluding NZ IFRS 16) up 21% compared to the same period last year. Grower
bales sold are on par to last year while export volumes are up 16% and there
has been a continuing focus on reducing our costs. The Real Estate business
is experiencing reduced activity within the rural segment but has maintained
its market position and share.
Retail & Water
Revenue for the Retail & Water group was up $5.0 million on the same period
last year. Conditions in the horticultural sector have remained positive and
our market leading Fruitfed Supplies business has performed well in servicing
the sector and its continued growth. The buoyant conditions in horticulture
have been underpinned by solid export returns. This has in turn stimulated
further investment and development with larger enterprises diversifying their
portfolios into the sector. Fruitfed Supplies remains well placed to benefit
from this growth as it builds on its reputation as the market leader in
delivering technical expertise, products and service.
Our Agritrade wholesale business has continued to demonstrate growth year on
year with revenue up on the same period last year by $3.4 million (+9.2%).
This was achieved through growth in our existing range in addition to product
acquisition. We continue to source opportunities to provide distribution
services for international brand owners contracting with Agritrade to bring
their products to market locally.
The implementation of the renewal programme for our network of Retail
premises across the country has continued with improvements and upgrades
implemented at a number of rural towns as well as the relocation of our head
office to premises on the Christchurch International Airport campus.
Mr Guerin said that "It has been especially pleasing to see that the
distribution arrangements between PGW Rural Supplies and PGG Wrightson Seeds
have continued to operate seamlessly since the divestment of the Seed and
Grain business in May last year. The seeds offering is an important part of
our business and I have been heartened by the way in which our respective
teams have continued to work together to deliver seeds and related inputs to
our customers as we have always done."
"Trading conditions have remained challenging in some pockets of the business
with Mycoplasma bovis having an impact on dairy and beef customers. Policy
changes to the application of the Overseas Investment Act and other
environmental regulation have also had an impact on land values and
investment decisions, and capital investment into dairy operations in
particular. Access to debt is constrained."
"The PGW Water business continues to face challenges given the lack of
on-farm development. Changes to government policy and the discontinuation of
development of irrigation schemes together with increasing environmental
regulation have resulted in sluggish demand. Accordingly, revenue for the
Water business was back $7.1 million or 34%."
Other
In August 2019 PGW made a capital distribution to shareholders of $234
million and declared a dividend payment of 7.5 cents per share ($5.7
million). Following these payments PGW's net interest-bearing debt was $59.3
million as at 31 December 2019. A substantial portion of this debt ($38.6
million) relates to PGW's investment in our Go livestock products.
Capital expenditure for the six months to 31 December 2019 was $4.6 million
($2.9 million less than the comparative period for the prior year). This
spend has seen continued investment in information technology including the
bidr(R) online trading platform and in Retail technology.
The financial statements have been impacted by the introduction of the new
lease accounting standard (NZ IFRS 16). The impact of this change has
reduced NPAT by $0.9 million. It is important to note that this change has
no net cash impact and is for financial reporting purposes only and is also
excluded from our bank covenant ratios and dividend calculations.
Outlook
Mr Finlay said "The Directors are pleased with the progress achieved in the
first half and the financial results."
"At this early stage, the Directors currently expect Operating EBITDA from
continuing businesses for the full year to be around $30 million excluding
changes due to the lease accounting standard. The Directors note there are
still many months of trading to complete and there could be some volatility
to earnings due to the impacts of COVID-19 on agricultural trade flows."
Stephen Guerin
Chief Executive Officer
PGG Wrightson Limited
For media enquiry contact
Julian Daly
General Manager Corporate Affairs
PGG Wrightson Limited
Mobile: +64275533373
End CA:00348949 For:PGW Type:HALFYR Time:2020-02-26 08:30:59
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