M. bovis affects PGW results

Listed rural services company PGG Wrightson (PGW) has reported muted results in what it refers to as an "operationally challenging" year, which included the effects of cattle disease Mycoplasma bovis.

The company has declared a dividend of 7.5c a share, bringing total dividends for the year to 15c.

In his first major announcement since being installed as PGG Wrightson chief executive in June, Stephen Guerin yesterday reported a $10 million reduction in operating earnings to $24.4 million for the year to end June 2019.

Excluding a $134.3 million one-off gain on the sale of the seed and grain business to Danish company DLF Seeds, which was finalised in February, earnings before interest and tax was $9.7 million (2017: $19.5 million) off virtually unchanged operating revenue of $809 million.

Mr Guerin said a combination of subdued farm spending combined with increased capital expenditure on IT, saw the company finish at the lower end of operation ebitda (operating earnings before interest, tax, depreciation and amortisation).

"It’s also important to note that ebitda result no longer includes any contribution from seed and grain,’’ he said.

The former head of PGW retail said M. bovis had affected results across key areas of the rural businesses, including livestock and rural supplies, "most particularly with reduced dairy herd settlements, a reduction in tallies, a softening of demand for dairy beef and a more cautious approach to spending in the dairy sector across a range of farm inputs’’.

He said market conditions also continued to challenge real estate and wool businesses with results down on last year.

Mr Guerin said farmer confidence in parts of the agriculture sector remained subdued, constraining farm spending and revenue growth over the year.

"This has seen a small increase in our overdue debtors and increased provisions taken at year-end for doubtful debts. Nevertheless, we’ve chosen to continue to invest in and build our business as we plan for farm spending to recover.’’

Divisionally, the retail and water division reported $11.6 million in after-tax profits, largely on the strength of horticultural company Fruitfed, which continued to benefit from orchard and vineyard development around the country.

"Market conditions for the horticultural sector remained positive despite some adverse conditions at key pollination, growing and harvesting periods.’’

He said the agency business, housing livestock, wool and real estate, reported a $4.7 million reduction in ebitda.

"Livestock was down on earnings at the half-year mark and did not recover to the extent expected over the second-half despite strong sheep and beef commodity pricing and demand.

The company had begun a corporate service model review.

"We expect to see the benefit . . . with savings in excess of $2.5 million expected in FY2020.’’

PGW closed down 2% yesterday at $2.35.

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