KEY POINTS:
Rural services company PGG Wrightson has reported a 68 per cent rise in first half net profit to $34.6 million.
Chairman Craig Norgate said the result reflected an improved underlying performance in most of the business, offsetting the impact of poor sheep prices. A strong return also came from the establishment of NZ Farming Systems Uruguay (NZFSU).
The result for the six months to the end of December was made on revenue from ordinary activities up 16.5 per cent from the previous corresponding period to $609.2m.
A fully imputed interim dividend of 5 cents per share would be paid from 4cps previously.
Mr Norgate said that, while the operating environment remained uncertain, the group was continuing to perform well.
The board remained comfortable with earnings guidance provided in December for full year net profit after tax and amortisation of about $60m.
That would consist of earnings from operations of $39m, along with a NZFSU performance fee of $8m, and NZFSU share appreciation of $9m based on a share price of $1.50, and capital gains and one-offs of $5m.
NZFSU, an offshoot of PGG Wrightson with operations in Uruguay, listed on the sharemarket in December at an issue price of $1.50 after an initial public offering in 2006. Around lunchtime today NZFSU shares were up 1c to $1.44.
Today Mr Norgate said the initial return from NZFSU reflected the value created by the timely establishment of the company, ahead of a substantial increase in international dairy prices.
That had been extended by an accelerated programme of land acquisition and farm development to take advantage of the favourable conditions.
PGG Wrightson's half year results from operating activities before interest, tax and non-operating items was $48.3m, double the $23.5m for the previous December half year.
Rural Services lifted earnings before interest, tax and amortisation (ebita), or operating earnings, from $12.2m to $14.6m.
Financial Services lifted ebita from $8.7m to $23.2m, assisted by the fee earnings from the NZFSU management contract.
Ebita from Technology Services was down from $11m, excluding a $2.15m gain on farm sales, to $10.1m.
Chief executive officer Barry Brook said benefits from the dairying boom were helping to offset the impact on the business of the difficulties faced by sheep and beef farmers.
Changes made in the past two years had established a strong foundation, and performance ha d improved across the group, he said.
It was pleasing to see benefits of expansion in PGG Wrightson Finance and Real Estate, and from the establishment of Funds Management.
The Rural Supplies business has made a strong comeback and Fruitfed Supplies was performing well, Mr Brook said.
The Seeds and Grain business continued to make a strong contribution, and recent acquisitions had helped position the business as the leader in the Southern Hemisphere.
PGG Wrightson shares were down 9c at lunchtime to $1.91, having ranged between $1.45 and $2.24 in the past year.
- NZPA
