One-off costs hurt poultry producer Tegel

In future, all new Tegel grower farmers intend to be free range.

Non-repeating costs from industry compliance, ex-cyclone Gita and organisational restructuring hurt the bottom line of New Zealand's largest poultry producer, Tegel Group Holdings.

Tegel yesterday reported an operating profit of $36.9 million for the year ended April 29, down about 25% on the $47.9 million reported in the previous corresponding period (pcp).

Despite paying about $4 million less tax, Tegel's profit after tax slumped by about 24% to $26.1 million from $34.2 million in the pcp.

The group said its non-repeating costs were about $9.9 million before tax, within the range previously indicated.

A final tax-paid dividend of 4.1c per share was declared, taking the total dividend to 7.55c per share.

The group also received a "qualified audit opinion'' on its 2018 financial accounts.

In a statement, Tegel said its directors had arrived at an opinion on the valuation of goodwill for the year that differed from that of the company's auditors.

The directors formed the view the discounted cash flows model consistently used by Tegel arrived at a more accurate estimate of the value of the business. Therefore, goodwill should not be impaired.

In addition, the adviser's report, commissioned to assess the takeover offer for Tegel, included a wider range of valuation modelling, the upper values of which were consistent with the company's view.

The qualified audit opinion had no impact on the takeover offer, the group said.

Philippines-based poultry group Bounty Fresh Foods sent the offer document for its $437.8 million takeover bid for NZX-listed Tegel Group to all shareholders on May 29 and said the minimum acceptance condition would be satisfied.

The $1.23-per-share offer would close on August 25, the document shows. The offer needs approval from the OIO.

Tegel chief executive Phil Hand acknowledged it had been a demanding year for the business. Underlying performance remained strong and the group had made investments for the long-term benefit of the business.

"While it is pleasing to be able to deliver results within our updated forecast range, there is no doubt it has been a demanding year on several fronts.

'We have stayed focused on delivering a strong operational performance and our increased volumes and revenue reflect this,'' Mr Hand said.

Tegel had a strong domestic position and the group was determined to achieve strategic and sustainable export growth.

During the 52 weeks, the group achieved highest-ever poultry volumes of 99,908 tonnes and revenue of $615.4 million, 2% ahead of the pcp and $1.4 million ahead of the 53-week comparative period.

Domestic revenue growth continued, driven by strong and increasing demand for poultry as a meat protein in New Zealand, Mr Hand said.

Domestic revenue grew nearly 4% to $467.1 million on an annual comparison basis.

During the year, Tegel increased its volumes in the Australian retail and food service areas, adding customers across all channels.

Consumers were still moving towards free-range options and the business was responding, he said. In the past 12 months, Tegel had increased its free-range capacity substantially, representing an additional 80,000sq m of farm capacity.

In future, all new Tegel grower farmers would be free range.