Slight dip in PGG annual profit

Pyne Gould Guinness today reported its June year net profit fell to $17.0 million from $17.75m a year earlier.

The company, which plans to merge with fellow rural services company Wrightson Ltd, said the profit fall was on operating revenue that was $19m higher at $308.3m.

Chairman Bill Baylis said while acknowledging that the execution of the merger would not be easy, "we are confident that all stakeholders in PGG; shareholders, clients and staff will benefit".

He declined to go into detail about the merger.

He said the outlook for the 2005/06 year was positive. Commodity prices and activity levels had to date remained strong.

He said the mood in most sectors was one of cautious optimism.

"We are continuing to gain momentum in the farm supplies business and would expect that those gains will be more evident in the coming year."

The finance division was growing, the real estate market was difficult to predict, the insurance market was soft, the wool market was expected to hold its own, the livestock market was expected to remain on a par with the past year and the troublesome irrigation unit was under control.

The 2005 result included a one-off gain of $2.4m from the sale of various properties compared to $3.7m last year.

Adjusting for those, the result 4.3 per cent ahead at $14.6m.

Cash flow for the year halved to $7.5m due to increasing client credit and trade debtors.

A final dividend of 5c per share was declared, giving an unchanged fully imputed 9c per share for the year. As well, a special dividend of 2c per share was declared in recognition of the gains made from the sale of surplus assets.

In addition, the company said it intended to issue a special dividend of 2.75c per share if the proposed merger with Wrightson proceeds. This, and a taxable bonus issue, would use outstanding imputation credits ahead of the merger. For some shareholders the bonus issue may be taxable.

Mr Baylis said that apart from irrigation and pumping division, the business was in good heart with the contribution from all other divisions combined exceeding last year's contribution by 21.8 per cent.

The livestock, finance, real estate and insurance divisions all had outstanding results.

The farm supplies contribution was confirmation that restructuring measures undertaken last year and further refined this year, had been effective, he said.

The irrigation business had "an extremely poor year". Sales held up well, but margins were well down and costs were up.

"Last year we reported that the business had struggled to meet demand. This year we improved our service levels significantly however we were unable to cover the increased costs."

Shares in PGG, owned 55 per cent by Pyne Gould Corp, were up 3c to a record $2.20 today shortly after the result.

- NZPA