The short story of 4Seasons Feeds Limited
4Seasons feed limited was a joint venture in the supplementary liquid animal feed market, set up on 1st August 2012. Joint venture partners were PGW (50%) and International Nutritionals Limited (50%). International Nutritionals is in turn owned jointly by RD1 and the Australian company Wilmar Gavilion. On 31st May 2014, PGW sold out to its joint venture partners.
According to this article
https://agrihq.co.nz/article/pgg-wri...ns-feeds?p=214
the ultimate divestment of 4Seasons Feeds was part of PGWs grand plan.
The 2014 cashflow statement shows that proceeds from the sale of investments net of cash totalled $21.1m during the year. Those proceeds included 50% of Gramins PTY Limited and Australian company that was deregistered (assume zero cash inflow for that) and 20% of "Di Santi y Romualdo LTDA", a dairy farm auction and liquidation business partly owned in Uruguay. In FY2013 "Di Santi y Romualdo LTDA" PGWs share of that business contributed a loss of $0.427m to the bottom line.
Assuming all of the sale of investment cash inflow was for 4Seasons Feeds (that assumption should overestimate the value of 4Seasons Feeds if anything) , that means the total 4Seasons Feeds business was valued at $42.2m as at 31st May 2014. Profits earned for an 11 month period were $4.048m. So the sale was on a PE of:
$42.2m/ [$4.084m x (12/11)] = 9.5
The margin of this business was: $4.048m/$55.192m = 7.3%
Compare that to PGWs own margin of under 3%.
My question is this. Why did PGW agree to sell a relatively high margin core business at what seems to be a bargain price? Because of this their profit will be hit by over $2m a year going forwards. Yet the profit on the sale was a measly $4.848m (note 10). Next year the total declared profit at PGW will take a hit of over $6.8m because of this sale. Why did PGW agree to sell their investment in this company, when on the face of it, it seems to be exactly the sort of company they should be buying?
SNOOPY
Water Dynamics Acquisition
Quote:
Originally Posted by
percy
Most probably the Water Dynamics acquisition.This would add to both current assets and current liabilities.
Percy, Note 23 contains all the information Mark did not release during the year when he purchased Water Dymanics. The fair value of Assets and Liabilities was $7.62m. Yet Mark only paid $6.38m. So we shareholders booked a 'profit' on this purchase of $1.24m Woo Hoo! Or is it too good to be true?
We learn that:
"If the significant acquisition of Water Dynamics and Aquaspec had occurred on 1 July 2013, the estimated Group revenue would have been $6.12 million higher and profit would have been $0.17 million higher for the year to 30 June 2014."
The margin on this new business is:
$0.17m / $6.12m = 2.8%
Makes interesting reading comparing that with the 4Seasons Feeds business we just got rid of doesn't it?
SNOOPY