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Rural services provider PGG Wrightson has pledged to boost its involvement in the buoyant dairy sector after its full-year result showed poor sheep and beef farmer confidence, dented by the high dollar.
Overall the company posted a net profit for the year to June 30, 2007 of $26.2
million, down from $27 million the previous year, a result executives blamed on the first full year of goodwill amortisation - worth $15 million - since the merger of Pyne Gould Guinness and Wrightson in late 2005.
Instead they pointed to net profit after tax but before amortisation of $41.4 million, 10 per cent higher than the $37.6 million from the previous year; and operating earnings of $63.8 million, up from the previous year's $54.4 million.
Net cashflow from operations grew $12.4 million to $41.1 million.
However, the company, which during the year restructured into three units - rural, financial and technology services - said the first of those had suffered a drop in operating earnings to $26.8 million from $30 million the year before.
Chief executive Barry Brook said that was because over the last season the climbing New Zealand dollar had cut prices at the farm and orchard gate, denting confidence among sheep and beef farmers and horticulturists, who had cut investment in services as a result.
However, the global influence on milk powder prices offset the negative exchange rate effect for dairy farmers, who emerged in buoyant mood.
Although the dairy industry accounted for 30 per cent of the company's real estate business, 30 per cent of its livestock business and 20 per cent of its rural supplies, Brooke vowed to increase those proportions. "We want to step that up in this new financial year."
Brook said the financial services division saw operating earnings grow from $15.2 million to $17.6 million, with its loan book growing 22 per cent to $402 million, and the establishment of a funds management business.
He said PGG Wrightson increased market share in the farm sales business from 25 per cent to 28 per cent.
And PGG Wrightson's proprietary seeds and grains business - part of its technology unit - remained the company's largest contributor to its earnings.
The company declared an increased final dividend of 8 cents per share, up from 6c a year ago. That would be paid in the form of bonus shares, which shareholders could choose to sell back to the company for cash.
On top of an interim dividend of 4c, the company said the total annual distribution would be 12c compared with 10c the year before.
Baylis said the company was in a "sound financial position", but that currency volatility meant it was too early to forecast operating conditions for this year.
PGG Wrightson shares closed down 5c at $1.70.