Bullish price action ahead of FY results tomorrow.
Printable View
Bullish price action ahead of FY results tomorrow.
Annual Results Announcement to 30 June 2021 - NZX, New Zealand’s Exchange
Annual Results Announcement to 30 June 2021
17/8/2021, 8:30 amFLLYRPGG Wrightson delivers impressive FY21 result
Group Performance
PGG Wrightson Limited* (PGW) today announced its results for the financial year ended 30 June 2021.
Key highlights of the financial year to 30 June 2021 included:
Revenue of $847.8 million (up $59.8 million or 7.6%)
Operating EBITDA** of $56.0 million (up $13.8 million or 33.0%)
Net Profit after Tax (NPAT) of $22.7 million (up $15.0 million)
Fully imputed final dividend of 16 cents per share
Very strong performances from our Retail, Fruitfed Supplies, Livestock, Wool and Real Estate businesses
Strong balance sheet and operating cash flows leading to a low net interest bearing debt balance at 30 June 2021
Continuing solid demand and pricing for New Zealand produce underpinning outlook confidence for farmers and growers, and in turn agri-services
PGW Chairman, Rodger Finlay said that “…our team and the business have again proved that they are leaders in the field in supporting our customers, the agri-sector, and rural communities to deliver an excellent result. The financial year started and finished strongly with year-end Operating EBITDA at $56.0 million, up $13.8 million or 33.0% on last year’s COVID-19 impacted result.”
“PGW also delivered a NPAT of $22.7 million which was up $15.0 million. These results further vindicate the decisions taken over the last two years in divesting the Seeds business and with the concomitant recalibration of our cost base and systems.”
“Based upon the strong full year earnings the Board declared a fully imputed final dividend of 16 cents per share. The dividend will be paid on 4 October 2021 to shareholders on PGW’s share register as at 5pm on 10 September 2021. This will effectively bring the total fully imputed dividends paid for the year up to an impressive 28.0 cents per share which I am sure all shareholders will be delighted about.”
“The Directors are particularly pleased that the business has backed up its strong first half result and has continued to trade well over the second half. This result reflects the collective efforts of the dedicated team that we have who are passionate about agriculture, supporting our customers and the role the sector plays for New Zealand. We have seen just how important and critical to New Zealand’s success the primary sector is and this has come into stark focus through the global pandemic.”
“As a business PGW is clear about its strategy of driving for growth through providing our customers with sector leading expertise and innovative solutions for their farming and production needs. We look to lead the market through the specialist knowledge and technical expertise of our people. We do this through investing in their capability and in identifying and bringing to market new products that we source and prove in New Zealand conditions. Our customers value PGW’s technical offering and see this as a distinguishing strength that we will continue to develop and foster. Our strong balance sheet allows us to contemplate earnings accretive growth ambitions, both internal and external.”
Turning now to comment on the performance of our Business Units.
Retail & Water Group
PGW CEO, Stephen Guerin said, “Retail & Water’s Operating EBITDA was a very pleasing $37.5 million and was up $4.3 million on the prior year’s result; an increase of 13.0%.”
“Both our Rural Supplies and Fruitfed Supplies businesses traded extremely well. We continue to increase our market share and much of this growth can be attributed to the superior technical expertise of our staff backed up by our leading product range. We have a very stable rep force who are well supported by our specialist technical and R&D teams.”
“A significant challenge that we and many other businesses face is around the much publicised supply chain disruption that is being felt around the world. This will continue to have an impact on the timelines for sourcing product and grower inputs as well as exports to offshore markets. Our team continues to work assiduously to proactively minimise supply disruption to our businesses and customers.”
“Our teams have been working collaboratively with our key suppliers, securing and taking product into stock earlier, and working with customers to lock in their seasonal requirements three to six months earlier than would ordinarily be the case.”
“Our Rural Supplies business experienced particularly strong growth this year which is a fantastic result in a highly competitive market. This success is attributable to both new customers who have shifted business to PGW and also growth in our market share as customers respond positively to our value-added technical offering and advice.”
“We have employed some great new talent in our business who have brought fresh ideas, and in some instances, new business. Our sales culture has grown through increased investment in our people and by providing more training opportunities across all levels of our business with the focus on sales and service.”
“Our Fruitfed Supplies business has again registered another record year for both Operating EBIDTA and revenue. This business is diversified across a number of crops and we continue to adapt to customer and market needs. The horticulture sector is growing and remains buoyant, and we are continuing to see investment and development.”
“We enjoy impressive market share across a broad range of horticultural crops and with particular strengths in the grape, pip fruit, stone fruit, and kiwifruit, and we continue to grow in the avocado and cherry sectors.”
“Our core focus remains to add value to our clients’ businesses through the technical ability of our Technical Horticultural Representatives (THR) and by supplying specialist products and services. Our technical expertise offering is differentiated by our expert Technical and R&D teams who support our field and store staff. This team conducts a number of trials across the industry investigating new products and chemistry to assist our growers and engage with industry bodies and prove products in New Zealand conditions.”
“Our wholesale subsidiary, Agritrade, which manufactures, sells, and distributes products continues to demonstrate positive momentum.”
“Maintaining inventory during the worldwide supply chain disruption created by COVID-19 caused Agritrade to place orders and receipt stock earlier than usual. Whilst the inability to travel internationally has hampered product development opportunities, it is nevertheless pleasing to note that five new products were registered during the year and are being commercialised.”
“We have reshaped the Water business to align with market conditions. This has resulted in an improvement in EBITDA compared to the previous year. Our full-service water and irrigation packages to customers through Rural Water has seen an increase in sales. However, shipping delays will likely push out some delivery timelines in the short to medium term.”
Agency Group
“Our Agency group incorporates the Livestock, Wool and Real Estate businesses. Trading for this group is weighted towards the second half of the financial year. Operating EBITDA was $25.2 million and was up $9.5 million on the prior year’s result; an impressive increase of approximately 60.6%.”
“Our Livestock business has maintained market share throughout the country with the South Island achieving a very solid result, especially within the sheep and beef sector. During the year strong values were achieved for sheep farmers, and dairy farmers also received increased pay-outs which in turn supported our Livestock business. Our Deer business experienced a good velvet season where values offset lower venison prices.”
“We expanded our GO-BEEF and GO-LAMB product offering and launched GO-DEER. Next year we expect to add to our GO-STOCK range with GO-DAIRY, which we anticipate will be well received and grow our GO-STOCK offering further.”
“bidr®, our virtual saleyard has run over 400 auctions and sold more than $50 million worth of livestock since its launch in June 2019. bidr® continued its significant software development and in FY22 live streaming from Fielding, Stortford, Wellsford, and Frankton saleyards will be launched with others to follow as we roll out this technology. Excellent Livestock Genetics results throughout the year culminated in the bull sales auction series where bidr®’s hybrid platform came to the fore.”
“PGW Wool has done a good job navigating through the ongoing challenges that have been accentuated by COVID-19. Our team worked closely with growers to reduce their stockpiles of crossbred wool and did see some benefit from improved pricing in the second half. Our export subsidiary, Bloch & Behrens worked diligently with overseas customers to ensure contracted obligations to our growers were fulfilled.”
“The Real Estate business has seen particularly strong demand across all sectors of the rural property market, which has also been fuelled by low interest rates. This resulted in the Real Estate business experiencing its best returns in over a decade at both an Operating EBITDA and gross commission income level.”
“We also see early signs of a positive spring for rural sales, with higher than normal appraisals taking place along with earlier spring listings occurring, which we expect will turn into continuing solid demand for the first six months of FY22. With strong commodity values in rural we anticipate a number of retirement and succession initiated listings coming to the market. The shortage of residential and lifestyle listings may continue with the current low interest rate environment a contributing factor.”
Cashflow and Debt
Mr Finlay noted that “PGW experienced strong operating cash flows during the year which benefited from the good Operating EBITDA performance and a focus on working capital management and receivables in particular. This focus has seen PGW’s overdue debtors balance continuing to track to historically low levels with our book in very good shape.”
“Capital expenditure of $6.8 million was $2.3 million lower than FY20 and was impacted by a slowing in the implementation of projects as a consequence of COVID-19 related disruption.”
“Net interest-bearing debt was approximately $6.5 million as at 30 June 2021 and is the lowest recorded at 30 June in over a decade, excluding 30 June 2019 when the proceeds from the sale of its Seeds business were held.”
Outlook
Mr Finlay said, “The outlook is positive in the rural sector with strong farm gate and commodity prices. Robust demand is expected to continue for lamb and sheep meat and cattle prices are anticipated to remain high. There is also confidence in dairy with a positive outlook into next year and a solid pay-out predicted.”
“Looking ahead, the Board is confident that the PGW is well placed to continue to grow. We have recently undertaken an internal review of our PGW Group strategy and have reset our Group objectives and priorities and we are rolling this out within the business currently. This exercise has served to reconfirm a number of the key themes that are continuing to drive improved performance for the business. Key in this is our continued focus on the technical expertise of our people and technical offering which differentiates us from our competitors.”
“There remains a degree of uncertainty globally with increasing geopolitical risks and as new variants of COVID-19 emerge. Implications from the pandemic will continue to impact consumer markets and the global supply chain. PGW is committed to supporting our customers through these ongoing challenges and has demonstrated that it can do this effectively and profitably.”
“We would hope to be in a position to provide guidance about our expectations for FY22 at our Annual Shareholders’ Meeting in October.”
All media enquiries to:
Julian Daly
General Manager Corporate Affairs
PGG Wrightson Limited
Mobile: +64 27 553 3373
Keep collecting those juicy divvies, 12c interim+16c final now. Total of 28c for FY21, not too shabby...
Indeed!
Spectacularly good results which blow market expectations out of the park.
To put the final fully imputed dividend of 16cps in perspective, market expectations (there are only 2 brokers covering the stock) were for full year dividend to be 16 cps.
Debt level down to bugger all ($6.5m vs $33.1m in 2020).
Best of all, outlook positive on all fronts.
I did expect a good result from PGW, but this is better than I expected. Technically I am a bit 'overweight' in PGW shares ( I significantly increased my holding in the months following the capital return), and have been for a while. So I may end up 'a little more overweight' in terms of dollars by the end of the trading day today :-). I do like the comments about gaining market share and cementing those gains by upping the technical knowledge of their staff. A cursory look through the accounts does throw up a few questions though:
1/ In the cashflow statement there was an incoming "Receipt for the termination of partnering contract, net of costs" of $3.934m. Someone has paid PGW off to get out of a partnering arrangement. Who were they? And what was the arrangement?
2/ Very bullish talk about expanding the 'Go-Receivables' finance business to 'Go-deer' and 'Go-dairy' in the future. Yet the 'Go-Receivables' balance is actually down to $45.869m from $48.111m. This in the time of rising values of livestock. Huh?
3/ Very pleasing to see the defined benefit plan for historic employees in the black, for the first time ever! This has obviously been helped by a good year on the equities market. But the main gain has been a change in assumptions. The 10 year bond rate assumption has gone up to 1.99%, from just 0.91%. Increasing that discount rate decreases the present value of future obligations. But until interest rates rise, the ability to ultimately pay the gross value of those operations does not improve. Lump sum contributions by the company to defined benefit plans (Employee Superannuation Contribution Tax inclusive) of $0.563m have helped square things up over FY2021. So I am not assuming that now the pension plan has a positive actuarial balance, is equivalent to saying there will be no need for the company to contribute further. Will there be a few more twists yet in the pension plan saga?
SNOOPY
Note 4 & Note 5 = +$6.3m. :eek2:
So you have given up on the imminent Chinese takeover and getting your cash out Balance? I knew you would come around to just appreciating PGW for what it was - eventually. I am very relieved to see the PGW balance sheet in such good shape. Because, to my way of thinking, building a low to no debt capital scenario in good times gives you the resilience to make it through the next farming cycle downturn which will inevitably come. The last few years has seen the debt position a bit tight, compounded by the decision not to relieve that tension - by prioritizing paying out capital to shareholders over paying down debt from the seed division sale. But that debt position also resulted in a laser focussed discipline on running the company better. Now for the first time in ages the board is starting to look outwards....
"Our strong balance sheet allows us to contemplate earnings accretive growth ambitions, both internal and external.”
On the prowl for acquisitions at the top of the business cycle? Their last big expansion doubling up -into water and irrigation- , when that market was looking all rosy, has not gone well. But that was under 'the Dewd'. And just enough time has elapsed and changes in leadership have come through for institutional memory to be diluted. I wonder what the next ill timed acquisition will be? I did shudder a little when I read the sentence I quoted above. Personally I would rather see PGW continuing to invest in their own people. I hope that is the way the growth goes. Otherwise Norwest may yet prove to be the smartest one here.
SNOOPY
No, I am enjoying the yield while waiting for the Chinese to make their move. Agria has to sell sometime and that will trigger the full takeover imo.
As I have articulated before, PGW stands out imo as one of the few NZX stocks which offers :
1. Yield
2. Growth
3. Takeover potential
Lucky someone paid to terminate a contract with them and they decided their stuff is worth a little more than they thought, would have been a million dollar loss for the second half otherwise.
I presume the business is pretty seasonal though, is second half generally well down on first?
I am much happier with the closing cash position at balance date although $3.4million still seems a big number while still having debt. Does highlight that last years cash on hand of $16.8million was a big error by someone, hopefully they are in gainful employment for another business.
A good result that seems inflated by some reversals of prior years "cooking" of the books especially the reversal on right-of-use assets.
After a quick look at todays results on FBU and SPK I have decided PGW is well undervalued when you look at NTAs and divs. Is there a simple reason why? The other two have had their issues along the way. I started buying a couple of months ago and I am thinking of making it a bigger part of my portfolio.
PGW will do well, when the farmers do well. Given that agriculture is currently our main earner of overseas income, they better do.
However - PGW used to be in the past very cyclical ... good times are followed by bad times. Just to calibrate the picture - at the moment we have good times ;):
Just throw one of these now twice a decade arriving "hundred year droughts" or some untimely floods and frosts at the wrong places into the game and it all might look quite soon quite different.
But hey - hard enough to predict what stocks are doing, who is able to predict the weather?
I think what I am saying is - they might be a good dividend earner in the portfolio, but I probably would not wave my diversification rules for them ...
Thanks. I think I get tunnel vision sometimes.
Hey Snoops, the health of the Defined Benefit Pension Scheme seems a lot healthier
I still think its nice of current shareholders to give the oldies their pension - no doubt even for some who once worked for divisions that PGW have hocked off
a bit more than that - FBU - no Imputation credits = you pay the tax
SPK - static imputed div going nowhere upwards fast- okay consistent / mature
PGW can be volatile .. but there is opportunity of the large tigers coming out to play
later from hibernation, when the 'who wants all of the cake' games start .. ;)
could be a good ride - enjoy the dividend & tax credits
I remember PGW pre the 10:1 consolidation, then after that & haven't they bounced since then .. :)
Someone happy to dump them CD (18c fully imputed) at 3.45.
David Cushing, former director seem to be disposing on market. He's still got fair few to go..
According to the NZX release David Cushing has changed his name by deed poll to "David Gushing". I can't shake the image of the newly renamed 'David Gushing' walking around with a giant boil on his body. Then he suddenly decides to lance it and those excess PGW shares start 'gushing out'!. Ah well, as he is off the board now, I don't see it as a warning sign for the business that our Mr Gushing is cashing up.
SNOOPY
Yes I had a bid in front expecting a top up. Maybe later? My two best div payers are PGW and HGH, I have enough of that one. I am tempted to take a little bit of ZEL but if it does not sell I wont enjoy owning it. PGW I know well.
PGW on a roll today up 3.5% to $3.85
People might have figured out it's offering a nice 16c final dividend and are chasing it to 9 Sep ex date?
Disclosure: Held
Was great buying just the other week when someone was selling at $3.45. :t_up:
Just wondering if the Board of PGW curse previous directors who sold several of the retail stores to be leasing them back at rates that would be higher than current interest rates. I looked at buying a couple of the retail stores but didn't as thought the return of 8% could be better achieved elsewhere and didn't fancy that for 10 years of leasing to them. Hindsight is a wonderful thing but I would have done better renting to PGW than collecting dividends from PGW. Guess the need to pay Agria a dividend was the price they are know paying for renting their stores.
$4 beckoning..
Looks like the Cushing sale hangover is gonna be with us for a while yet.
That's ok - they sold most of their stock at $2.75 to the Chinese last year, and prior to that Cushing had been lightening up their stake at lower prices.
Gives those who are looking for a stock with a great yield with growth & takeover potential a cheaper entry point (eg. me).
Cushing sale will not last forever.
Be at least $4 when they finish selling imo.
Looking like same again....
PGW Guidance Update - NZX, New Zealand’s Exchange
Rising commodity prices & food shortages emerging as the world opens up - PGW is very well positioned indeed!
Happy holder from when they announced the sale of the seed business to reduce debt & focus on growing earnings.
Mr Market is liking the update. SP up 3.5% this morning :-)
Great to see PGW powering on beyond $4.00 which is a key resistance point imo.
Rising agricultural & food prices globally mean NZ’s farming sector is in good heart and PGW will continue to benefit, now that it has left most of its its problems and overgearing behind.
https://modernfarmer.com/2021/10/ris...l-food-prices/
Cushing sold some shares in Oct 2019 at $2.32 and the majority of their remaining stake at $2.75 in April 2020. Company has paid 37c fully imputed dividend since March 2020.
Sp was $4.18 yesterday so those who bought off the Cushings at $2.32 & $2.75 have made 96% & 62% respectively in that time.
Point being that the market always tend to assume that a large shareholder selling down can be bad news when it is not always the case .
Hey VCT sold NWF at 10 cents after 1 dividend and I sold quite a few at 13 as a Director. Look at Zero. But then look at ATM I suppose. You have to try to understand why the selling has happened if an insider or recent insider has sold some. The ATM case will be fascinating. And why did everyone sell at the same time??
https://www.nzx.com/announcements/381528
Farmgate milk price forecast up another 40c - all good stuff for farmers and PGW.
We've hit an ATH of $4.40. Looks like Mr Market expects positive downstream effect for PGW from Fonterra's higher milk payout
Div yield doesn't look too shabby ;)
1/ Agria founder Alan Lai announces he has sold his PGW stake for $3.20 per share to the Chinese Government, in return for all CCP charges against him being dropped.
2/ Northington Partners announced as independent valuers on the deal, and conclude that fake milk pricing is distorting the market trading in PGW shares, and that the intrabusiness cycle full and fair valuation of PGW shares is $3.
3/ Directors, from an independently managed hotel in Hong Kong where they may be staying for a few years, declare the 6.66% premium offer of $3.20 to fair value as 'devilishly high' and recommend shareholders accept - or else!
4/ Balance and the rest of us sell out, and the directors are released.
5/ Jacinda praises 'shareholder kindness' and the former shareholding Cushings are shown to have come out the winners - again!
SNOOPY
Highest milk solids payout ever by Fonterra.
More tailwind & favourable conditions for PGW.
https://www.rnz.co.nz/news/country/4...to-record-high
Six weeks ago they said expect Operating F22 EBITDA** to be broadly in line with last year’s impressive performance at around $53 million.”
Today they say PGW was raising its full year guidance to around $58 million at an Operating EBITDA** level.” .... better than last years $56m
Nothing like growing profits
That's pretty good eh
My thought on the meeting, pretty solid performance across all divisions with wool being the only laggard.
No DRIP in foreseeable future, reason being very strong balance sheet meaning continued returns to shareholders through fully imputed divvies, love it.
Actively looking for strategic acquisitions that are core to the business and also earnings accretive from get go.
I think we're "well positioned" :t_up:
Hey Snoops me old mate …..have you the last 5 years Operating Ebitda on a like for like basis …ie adjusting for the change in accounting of leases (which effectively increased ebitda by quite a lot
I’m after F16 and f17 and F19 to complete the series X, Y, Z, 48.2m, 56.0m and F22 58.0m
Just being lazy
Cheers
Hi Winner,
Two points.
1/ I tend to work on NPAT for my comparative figures. Those figures are not affected by the change in accounting lease standards, so I don't have the comparative EBITDA figures you ask for at hand.
2/ Where I have looked at doing this before (in another company), I have always adjusted the current EBITDA figures back to what they would have been under the old standard. What you are proposing is the other approach of adjusting the old figures up to the new standard. To my mind that is the better way to go (always better to be forward looking). The problem I run into is finding a practical way to do that.
The lease change standard effectively replaces an expense called 'rent', with two new expenses, those being:
a/ Depreciation of a 'right of use asset'
b/ An interest charge on lease liabilities.
The 'rent expenses' for want of a better broad umbrella term, sum match over the total term of a lease contract(s) under each method. But on a year to year basis they do not match, due to different accounting discounting rules.
The problem is in the old accounts, the split between depreciation of a 'right of use asset' and 'interest lease expense' is not declared, because under the old accounting standard such a separated construct did not exist. Sure you can make some estimates of what the historical split might be. But that sort of stuff is beyond my accounting pay grade. Is there a way to practically do this? You Winner, are probably one of the few people on this forum qualified to answer that question.
SNOOPY
Thanks Snoopy …thought it would be hard trying to get adjusted (fiddled) numbers
Was trying asses whether this is a good trend and where it might head seeing F22 58m isn’t much more than F21 56m.
Trend:
F22 58m guidance
F21 56.0m
F20 42.2m
F19 24.4m but includes leases
F18 34.5m including leases
Snoopy …so this impressive looking chart they showed at the ASM isn’t really the truth ……lemons some years and apples other years
Never mind …the market doesn’t care ..just focusing on 2021 and 2022
Record earnings for the primary sector - a restructured and now well managed & well positioned PGW cannot but benefit.
More profit upgrades for PGW to come.
https://www.1news.co.nz/2021/12/14/n...d-508-billion/
The revenue from food and fibre sector exports are projected to surge to a record $50.8 billion.
Where are all sellers gone :eek2::D
I have always enjoyed dealing with PGW and it's people. Now enjoying being a shareholder, do we need a new target? I had been thinking maybe there was some background activity.
There had been talk that the Chinese are keen to get PGW to help set up a network of rural servicing branches in China to modernise & upgrade China’s rural servicing sector.
If something like that goes ahead under a licensing & management agreement, it would be a huge boost to PgW’s fortunes.
Not keen on PGW putting any money outside of NZ. So must only be an expertise arrangement - not investment.
Having experienced first hand Chinese investment as Fonterra shareholder I'd be completely against any capital flowing east. There was a time when Fonterra did well with management contracts with overseas Dairy companies. Maybe before Fonterra, NZDG.
and hit five dollars...
and 10% of portfolio
i haven't been buying since $3.37 in january, until a few more in August, and then again on Tuesday at what felt steepish at $4.74 ;)