PGW - PGG Wrightson

[Snoopy]

HY2024	Retail & Water	Agency	Back Office Total
Revenue	$478.301m (85.4%)	$81.589m (14.6%)
EBITDA	$39.962m	$1.431m	($4.775m)
less Back Office EBITDA ReAllocation	($4.078m)	($0.697m)
less Net Interest Allocation	($2.019m)	($1.035m)	($1.666m)
less Back Office Interest ReAllocation	($1.423m)	($0.243m)
less Depreciation & Amortisation	($8.214m)	($4.771m)	($1.537m)
less Back OfficeDA Reallocation	($1.299m)	($0.238m)
less Income Tax Benefit (Expense)	($8.412m)	$1.154m	$2.469m
add Back Office Tax ReAllocation	$2.109m	$0.360m
equals NPAT	$16.626m	($4.039m)
Net Profit Margin	3.48%	-4.95%

Notes

1/ Reallocation apportioning is on the basis of divisional revenue.

The first half produced a NPAT of: $16,626m-$4.039m = $12.587m

How bad did it really get in that second half year?
This is a 'subtraction exercise', because we know the 'divisional profitability of FY2024' and the 'divisional profitability of HY2024'.

2HY2024	Retail & Water	Agency
Revenue	$255.275m	$99.110m
EBITDA	$1.080m	$10.883m
less Back Office EBITDA ReAllocation	($3.289m)	($1.122m)
less Net Interest Allocation	($1.380m)	($2.589m)
less Back Office Interest ReAllocation	($0.985m)	($0.382m)
less Depreciation & Amortisation	($8.895m)	($3.781m)
less Back OfficeDA Reallocation	($1.249m)	($0.391m)
less Income Tax Benefit (Expense)	$2.808m	($1.248m)
add Back Office Tax ReAllocation	$0.644m	$0.320m
equals NPAT	(-$11.266m)	$1.690m
Net Profit Margin	-4.41%	1.71%

Notes

1/ Reallocation apportioning is on the basis of divisional revenue.

Total loss figures for the second half after tax were: -$11.266m+$1.690m=-$9.576m, with livestock auctions lightly 'saving the day'. No wonder PGW do not publish their second half results stand alone to highlight such things! But having said that, Rural Supplies, where farmers are buying their farm input goods at the start of the growing season are always weighted to the first half. And Agency, dominated as it is by livestock auctions is always going to be weighted to the second half as fattened up animals are sold for good process. That means the pattern of these second half results are not unusual and it does not mean the company is 'going to the pack'. But the 2HY2024 result does represent a negative tinge on the more usual seasonal result pattern.

SNOOPY

[Snoopy]

To calculate the 'cost of sales' from the 'sales revenue' you have to know the net profit margin. You won't find that figure in any PGW report. However, it is possible to work in out. And this is an exercise that I have now done (posts 5774, 5775 and 5776). So I can now redo these stock turnover calculations as per Ferg's suggestion.

Period Stock Turn = (Cost of Period Revenue)/(Snapshot of Inventory value)

Average Inventory FY2023 = ($107.533m+$129.717m+$102.048m)/3 = $113.099m
Cost of Retail and Water Revenue = (1/1.0213)x$765.661m = $749.693m
=>FY2023 Annual Stock Turn = $749.613m/$113.099m= 6.6 times

Average Inventory HY2023 = ($129.717m+$102.048m)/2 = $115.883m
Cost of Retail and Water Revenue = (1/1.0454)x$487.909m = $466.720m
=>HY2023 Stock Turn = $466.720m/$115.883m= 4.0 times (equivalent to 8.0 times annual rate)

Average Inventory HY2024 = ($130.769m+$107.533m)/2 = $119.151m
Cost of Retail and Water Revenue = (1/1.0348)x$471.471m = $455.616m
=>HY2024 Stock Turn = $455.616m/$119.151m= 3.8 times (equivalent to 7.6 times annual rate)

The result of the correction is a little bit of a drop in the stock turn rate. But the basic narrative remains unchanged. That being that stock turns over faster in the first half than the full year, and that the stock turnover rate over HY2024 is a little behind that over HY2023, although it is not alarmingly lower. That is pretty much what you would expect in a rural downturn. This is of course not what shareholders would like to see. But I don't see a sign of mismanagement here. To improve the stock turnover you would have to reduce inventory even more, which may not provide farmers with the choices that they need or want.

To calculate the 'cost of sales' from the 'sales revenue' you have to know the net profit margin. You won't find that figure in any PGW report. However, it is possible to work in out. And this is an exercise that I have now done (post 5841). So I can now do the stock turnover calculation.

Declared 'retail and water' revenue over FY2024 was $719.961m
Declared 'retail and water' revenue over HY2024 was $471.471m
=> Calculated retail and water' revenue over 2HY2024 was $248.490m

Period Stock Turn = (Cost of Period Revenue)/(Snapshot of Inventory value)

Average Inventory 2HY2024 = ($130.769m+$95.192m)/2 = $112.981m
Cost of Retail and Water Revenue = (1/(1-0.0441)x$248.490m = $259.954m
=>2HY2024 Stock Turn = $259.954m/$112.981m= 2.3 times (equivalent to 4.6 times annual rate)

The basic narrative remains unchanged. That being that stock turns over faster in the first half than the full year. The stock turnover rate over HY2024 is a new recent low and behind HY2024, which does cause me concern. But that is what you would expect in a rural downturn. Yet to improve the stock turnover you would have to reduce inventory even more, which may not provide farmers with the choices that they need or want (as per Toddy's experience today).

SNOOPY