Announcement
HALFYR: ALF: FY21 Half Year Report
01:50pm
ALF
26/02/2021 13:50
HALFYR
PRICE SENSITIVE
REL: 1350 HRS Allied Farmers Limited
HALFYR: ALF: FY21 Half Year Report
26 February 2021
HALF YEAR 2021 REPORT
Half Year Result
The Directors of Allied Farmers Limited (NZX: ALF) report an unaudited
after-tax profit of $0.531 million for the six months ended 31 December 2020.
Pleasingly, this is higher than the previously indicated range of $0.2
million to $0.4 million.
While ahead of budget and forecast, Allied Farmers's pre-tax operating result
in this period was lower than the previous corresponding period ($1.18
million), with subsidiary New Zealand Farmers Livestock's (NZFL) result for
the period significantly impacted by Covid-related pricing impacts on veal
processing returns.
As in previous years, the returns from the veal processing operations
continue to be a major contributor to first half year performance. However,
investors are reminded that typically Allied Farmers's second half year
profit is driven by factors distinct from the veal processing results that
drive first half year profit. The second half is strongly influenced by
livestock trading and herd sale activity, much of which will occur in the
later part of the second half, and therefore it is not possible to forecast
full year profits based on first half performance.
While 2020 was undoubtedly a challenging year, through the dedication and
creativity of our staff, Allied Farmers starts 2021 in a strong position. For
this, we thank the whole team.
Dividend
In November 2020 Allied Farmers declared a lower dividend of 1.2 cents per
share fully imputed (2 cents per share fully imputed in January 2020). This
reflected that the FY20 full year result was lower than the previous year.
Capital Raising and NZ Rural Land Management Investment
During the period Allied Farmers completed a successful oversubscribed rights
issue raising $2.976 million (less costs), the purchase of 50% of New Zealand
Rural Land Management (NZRLM) - the manager of newly NZX listed New Zealand
Rural Land Company Limited (NZRLC) - through the issue of new share capital,
and an investment of 1.49% ownership in NZRLC. We were delighted with the
support from shareholders for these transactions, and with the successful IPO
of NZRLC, which was a necessary precursor to the NZRLM purchase.
Strategy
The Board is excited about the future for Allied Farmers and considers it is
now very well placed to execute on its strategy. With new capital raised and
new shareholders on the register, its investments in NZRLM and NZRLC, and
shareholder approval to raise up to an additional $5 million of new capital
via placements, Allied Farmers can move forward on expanding its presence in
the wider agricultural sector and on seeking agribusiness opportunities
outside of its current traditional lines of business.
In particular, and as previously indicated, the intention is to invest into
the growth of our finance subsidiary, Rural Funding SolutioNZ, to widen and
improve our rural finance offering. In addition, we continue to evaluate
opportunities in the AgriTech space.
Business Update
Livestock Agency and Veal Processing
Livestock, after a slower start, finished strongly in the second quarter. The
NZFL result was dominated by well foreseen and budgeted Covid-related impacts
on veal business revenues. However, NZFL finished the half year ahead of
expectations despite the challenging conditions facing its business
divisions.
The livestock agency business saw lingering drought concerns impacting
trading behavior early in the period, softer stock pricing in line with red
meat schedules and pleasing market share and tallies later in the half year.
Dairy stock prices have held well to date and some movement in dairy farm
sales and forecast milk payouts bode well for herd sale volumes in the second
half.
Building of the team and of market presence has continued and will be a
continuing priority.
NZFL is committed to a strategy of providing a superior service to its farmer
clients to assist them to be successful in the operation of their own
businesses. To this end, NZFL remains focused on growing its livestock
agency business through the recruitment of new agents, selected development
of new sale yards or access to existing yards, and a continued leadership in
the NZ live auction space.
The veal processing and trading profit was well behind prior year and very
much in line with budgeting for a severely Covid-affected year. This largely
reflects foodservice impacts, skin pricing changes, and the strengthening New
Zealand dollar. Delivering a profit despite these conditions is a pleasing
result and underlines the resilience of this business.
Finance
While the livestock financing book was smaller in size than a year earlier,
we are confident this area presents good potential and is seeing effort on a
range of fronts to deliver material growth and some diversification. The
provision of financing enhances NZFL's ability to assist farmer clients in
the management of their cash flow, and credit risk is reduced by largely
lending to farmer clients with whom NZFL's agents already have a strong
relationship and understanding. The Allied Farmers's group financing effort
was broadened during the period with the commencement of lending by
subsidiary Rural Funding SolutioNZ. Allied Farmers's believes that with
traditional lenders continuing to show less support for New Zealand pastoral
food producers, there are significant opportunities to grow and nurture an
alternative lending organization. This will remain an area of focus for the
group and will be well supported by new equity. We consider the increased
financing options will be welcomed by our customers.
Technology
The MyLiveStock web platform and app is an important part of group strategy
and is valued by clients. MyLiveStock now offers on-line bidding at each of
its major yard auctions and creates clear benefits to farmers and to the
functioning of this critical market. Further development of this platform is
planned and ongoing.
NZ Rural Land Management and NZ Rural Land Company
NZRLC raised $75 million through its initial public offering (IPO) in late
2020. NZRLM, 50 percent owned by Allied Farmers and NZRLC's manager, is now
progressing due diligence on dairy farms in the South Island for NZRLC. While
potential acquisitions were identified prior to the IPO, extensive due
diligence (e.g. irrigation reports, soil testing, etc), necessarily has taken
time due to the size of the dairy farms. NZRLC has advised its shareholders
that it anticipates being in a position to announce the terms of an
acquisition in several weeks.
Outlook
The early stages of the second half of the financial year has been dry in
some parts of the country and continued disruption to the food export trade
and global logistics caused by Covid-19. A return to more normal weather
patterns across the country, plus the expected future containment of
Covid-19, should support livestock trading activity. We are seeing some
encouraging in-market pricing despite the ongoing challenges and the
strengthening New Zealand dollar. Allied Farmers is certainly agile and well
placed to contribute.
Allied Farmers takes much pride in working with New Zealand farmers who are
vital in the global food chain and are known for producing high quality food
with care and responsibility.
Richard Perry
Chairman
End CA:00368333 For:ALF Type:HALFYR Time:2021-02-26 13:50:38
Click here
to view related attachments.
