PGW - PGG Wrightson

[iceman]

PGW
13/02/2024 16:43
ADMIN
PRICE SENSITIVE
REL: 1643 HRS PGG Wrightson Limited

ADMIN: PGW: Shareholder Meeting Request

Shareholder Meeting Request

PGG Wrightson Limited (PGW) advises that late last week it received the
attached request from Agria (Singapore) Pte Ltd (Agria) requesting that a
special shareholders meeting be convened to consider the resolutions set out
in the notice seeking a number of board changes.

Following receipt of the notice on the afternoon of 8 February 2024 PGW
promptly sought to engage with Agria in relation to the matters outlined in
the notice and sought advice from its external lawyers, Chapman Tripp. The
PGW Board convened on 12 February and 13 February to discuss the notice and
has continued to liaise with Agria to explore whether Agria would withdraw
the request to enable a more constructive board transition to take place.

Following further dialogue today, Agria has this afternoon confirmed that it
will not withdraw the notice requesting that a special shareholders meeting
be convened and accordingly PGW is preparing for a shareholders meeting.

The PGW Board will issue a notice of meeting at the relevant time together
with appropriate information for shareholders about the matters to be
addressed at the meeting.

For media enquiries contact:
Julian Daly
General Manager Corporate Affairs / Company Secretary
PGG Wrightson Limited
Mobile: +64 27 553 3373
Email: companysecretary@pggwrightson.co.nz

[iceman]

Agria wants to remove Directors Garry Moore, Sarah Brown & Charlotte Severne and appoint Alan Lai, Wilson Liu, Vena Crawley & Tracy Houpapa.

[Snoopy]

Agria wants to remove Directors Garry Moore, Sarah Brown & Charlotte Severne and appoint Alan Lai, Wilson Liu, Vena Crawley & Tracy Houpapa.


Agria's Alan Lai,, is obviously not happy about something! The two directors he does not want removed are U Keon Seng, an Agria anointed director since 2013, and Meng Foon who has only just come on board last year (I guess that means he is too new to be blamed for past PGW board indiscretions).

The reason Mr Lai wants four new directors appointed and is removing three is because one of the Agria aligned directors Lee Joo Hai resigned suddenly in late 2023 as a result of a investigation unrelated to PGW by the Singaporean Stock Exchange, concerning another company of which Mr Lee was a director. The two new nominated NZ based directors look well chosen.

Vena Cawley was the chief customer officer at Contact Energy, so was obviously very customer focussed, before embarking on his professional directorship career.

Traci Houpapa even has her own Wikipedia page.
https://en.wikipedia.org/wiki/Traci_Houpapa

Traci Houpapa was appointed Chair of Landcorp in May 2015. Houpapa also holds governance roles on the Waikato River Authority, NZ Forestry Investments Limited, and Pengxin NZ Farm Management Limited.

Wilson Liu, looks like he might be part of Alan Lai's wider circle of business contacts in Hong Kong.

And of course Alan Lai himself, as a former chairman of PGW, needs no introduction.

One thing that caught my eye was the requested date of the special meeting. The 22nd February is five days before the half year result for FY2024 was due to to be declared, on 27th February.

SNOOPY

[Snoopy]

Agria's Alan Lai,, is obviously not happy about something!


I wonder if my post from June 2023 below might explain Mr Lai's unhappiness?



So what has Mr Lai been up to of late?

It turns out that being the controlling shareholder of Hong Kong listed 'China Pipe Group Limited', he has just renewed a $US10m loan from that company.

https://www1.hkexnews.hk/listedco/listconews/sehk/2022/0422/2022042201592.pdf,

until 31st July 2025. This, plus the capital return on disposal of the seed business, should have strengthened the Lai/Agria finances to the point where he is under no pressure to sell that Agria PGW stake. But the 5.5% interest rate he has agreed to pay is above 'bank rates' in Hong Kong. Security for the loan is 20% of the shares in Agria Asia Investments Limited (AAIL) (p5 of above reference).

"AAIL is indirectly holding a share equity investment in an agricultural enterprise in New Zealand (which is PGW) through Agria (Singapore) Pte. Ltd. (“Agria Singapore”), the only and wholly-owned direct subsidiary of AAIL."

"According to (i) the latest consolidated management account of Agria Singapore for the nine months period ended 31 March 2022 and (ii) the latest unaudited consolidated financial statement of AAIL for the nine months period ended 31 March 2022 provided by AAIL:-

(a) the net assets value of Agria Singapore as at 31 March 2022 is NZD66.1 million (equivalent to approximately US$45.6 million);
(b) the net assets value of AAIL as at 31 March 2022 is approximately US$172.5 million."

The PGW share price closed at $4.43 on 31-03-2022. With Agria Singapore declaring a shareholding of 33,463,399 shares, this shareholding was worth:

$NZ4.43 x 33,463,399 = $NZ148,242,857.

Yet we are told the net asset value of Agria Singapore, which I believe holds PGW shares as their only substantial asset, is only $NZ66.1m. If my maths is right, this indicates a substantial quantum of borrowed funds on the Agria Singapore balance sheet: $NZ148.2m - $NZ66.1m = $NZ82.1m.

Of course over the last twelve months, PGW has paid a substantial dividend to Agria Singapore:

33,463,399x($0.14+$0.16) = $10.0m

That would be cashflow neutral or better to Agria Singapore, provided borrowing interest rates were less than: $10.0m/$82.1m = 12.2%. Since interest rates for borrowing by Mr. Lai Guanglin are well under that figure, it looks like dividends from PGW would have to halve before Mr. Lai Guanglin would come anywhere near any financial strain


Dividends received over FY2023 were 12cps ((interim dividend for FY2023) and 10cps (final dividend for FY2023, but paid during FY2024). This represents a payment to Mr. Lai Guanglin over the previous 12 months of:
33,463,399x($0.12+$0.10) = $7.36m.

That still looks OK, such payment would cover an interest rate on $NZ82.1m of borrowed capital at Agria Singapore of $7.36m/$82.1m = 9.0%. But what about the expected dividend stream expected from PGW over FY2024?




Consolidated Statement of Profit and Loss for FY2024 (forecast)



Operating EBITDA$52.000m


less Depreciation and Amortisation Expense$28.063m


equals EBIT$23.937m


less Net Interest and Finance Costs$9.573m


equals Profit Before Income tax$14.364m


less Income Tax Expense$4.022m


equals Profit Net of Income Tax$10.342m



Now: $10.342m/75.484m= 13.7cps



If PGW are sitting tightly against their banking covenants, I can't see that total dividend payment exceeding 14cps. This will mean the dividend is halved from FY2022!

33,463,399 x 0.14 = $NZ4.68m (dividends payable to Agria Singapore). On an $NZ82.1m debt, this would cover borrowings made at a rate of $4.68m/$82.1m = 5.7%

This could be a problem if the Agria Singapore borrowing rate was higher than 5.7%, and I think it might be! No wonder Mr Lai is looking for a board shake up at PGW, if PGW's threatened reduced dividend stream is putting his ability to service his loans in Singapore and Hong Kong at risk.

SNOOPY

[Snoopy]

Interesting to plug this new EBITDA guidance into the 'Consolidated Statement of Profit and Loss for FY2023' and the associated cost structures.

Consolidated Statement of Profit and Loss





FY2024 ForecastFY2023 Actual



Operating EBITDA
$52.000m$61.194m



less Depreciation and Amortisation Expense
$28.063m$28.063m


equals EBIT
$23.937m$33.509m


less Net Interest and Finance Costs
$9.573m$9.573m


equals Profit Before Income tax
$14.364m$23.936m


less Income Tax Expense$4.022m$6.418m


equals Profit Net of Income Tax$10.342m$17.518m



Now: $10.342m/75.484m= 13.7cps

As it happens 10.0cps has already been paid out during FY2023 as the final dividend for FY2022. So to keep that balance sheet intact, the final dividend paid during FY2024 (actually the interim dividend for FY2024) should be no more that 4cps. And 4cps is only a little down on the interim dividend paid in that same time space but a year earlier of 12cps. Hey, just a minute........


Three and a bit months on from this announcement, it was notable to read in the Skellerup half year announcement today that EBIT in the Skellerup agricultural division was $11.861m for the half year, down 19% on the previous half year (HY2023 EBIT was $14.614m) . Depreciation and amortisation for this division was listed at $2.032m (HY2023 D&A was $2.108m).

Therefore I calculate the decline in EBITDA at the agricultural division of Skellerup HY2023 to HY2024 to be: ($11.861m+$2.302m)/($14.614m+$2.108m) = -15%

Compare this to the forecast decline in EBITDA at PGW: $52m/$61.2m= -15%

Exactly the same number! This is consistent with the forecast decline of performance forecast at PGW being 'industry related', rather than a specific operational factor at PGW that needs to be addressed.

SNOOPY

[Davexl]

Given that "Alan" Lai is a confirmed crook (SEC judgement on Agria assets inflated values),
see todays NBR article "Another fine mess at PGW - blame the OIO",
and that the OIO didn't punish Agria by taking their shareholding back to 25% as they supposedly should have,
it is imperative to vote this down at any upcoming meeting. OIO - are you missing in action again ?

[Snoopy]

Given that "Alan" Lai is a confirmed ***** (SEC judgement on Agria assets inflated values),
see todays NBR article "Another fine mess at PGW - blame the OIO",
and that the OIO didn't punish Agria by taking their shareholding back to 25% as they supposedly should have,
it is imperative to vote this down at any upcoming meeting. OIO - are you missing in action again ?


Where did the 'should have taken Agria's PGW holding back below 25%' come from? I have never heard that before. IIRC, the mandate was for Agria to cede control at the time - which is what happened, by Agria reducing their holding to 44.33% from 50.22% over FY2019. So calling for the OIO to roll up their sleeves, amend their prior decision, and have another go at Mr Lai five years down the track is not going to happen.

You also need to remember that the SEC in the United States does not have authority in New Zealand. Yes there was a separate civil judgement against Mr Lai in NZ as a result, which meant more hefty fines in this country. But it is now five years on, Lai has paid all his (and Agria's) fines and his five year ban on being a US registered company director has now come to an end. Once Lai has 'served the time' on the director sidelines and 'paid the fines', does the 'poor character' argument still wash?

In any instance, I think it is a case of 'be careful what you wish for'. The legal right for Agria Singapore to hold a substantial stake in PGG Wrightson has not changed. So if Mr Lai does not return to the board, what will you get? Likely a lot of Lai lackeys who will have to pause at certain points during board meetings, then race off to the car park to consult their largest shareholder Mr Lai, before going back to the board room to confirm their decision. That sounds like a charade to me. Would it not be better to have the largest shareholder, even if not as chairman, back on the board so that all board members could eyeball him?

SNOOPY

[Snoopy]

Agria's Alan Lai,, is obviously not happy about something! The two directors he does not want removed are U Keon Seng, an Agria anointed director since 2013, and Meng Foon who has only just come on board last year (I guess that means he is too new to be blamed for past PGW board indiscretions).

One thing that caught my eye was the requested date of the special meeting. The 22nd February is five days before the half year result for FY2024 was due to to be declared, on 27th February.


Looks like the ante has been upped, late on a Friday. Something for Mr Lai to think about over the weekend?

---------------------------

PGG Wrightson Governance Update: 16/2/2024, 4:25 pm ADMIN

The PGG Wrightson Limited (PGW) Board has by a majority today elected Garry Moore as an Independent Chair.

Given the company plans to release its half-year results on 27 February, the PGW Board determined that it is in the best interests of the company to have a New Zealand resident Chair to work closely with the senior management team to continue to drive the business forward.

Mr Moore thanked Mr U Kean Seng for his work as an overseas-based Acting Chair since July 2023. Mr U plans to remain a non-executive director, and Sarah Brown will continue as an Independent Deputy Chair.

In relation to the recent request from Agria (Singapore) Pte Ltd for a special shareholders meeting to be convened to vote on a number of proposed board changes, Mr Moore noted that “The Board had convened its Nominations Committee to work through a robust process to consider the nominations and other matters relevant to Agria’s notice. The Board will lead the process and take external legal advice and consult with relevant regulators as appropriate.”

-----------------------------


That reads to me like Lai Guanglin's anointed man at the top, Mr U Kean Seng, has been rolled! I think I can guess at least one of the votes (if indeed there were more than one) against Mr U Kean Seng's removal. I wonder which way Meng Foon, who was the other director Guanglin Lai thought was O.K., voted? If he was sensible and being aware of all possible outcomes, I think it would have been diplomatic of him to abstain.

Saying the board believed it was best to have a New Zealand chair to engage with senior management to drive the business forward was very odd. PGW has not had a New Zealand based Chairman since Roger Findlay in 2021! Two foreign chairmen and three years later, the board has only just figured out that this isn't working, three years later?

How can the board 'lead the process' AND 'take external legal advice'? Will the board follow the external legal advice or go against the external legal advice do you think? So who is really leading this process here, and who is hiding behind a 'legal shield'? It sounds to me like most of the board are 'digging a trench' and will be coming to the soon to be convened special meeting in 'battle dress'!

Meanwhile the share price yoyos down and up by more than 6% as the situation develops.

SNOOPY

[Oliver Mander]

Good evening all. Please find a link to an NZSA article published early this morning. Might be of interest...
https://www.nzshareholders.co.nz/scrip-article/with-shareholders-like-this-who-needs-enemies/

[iceman]

Good evening all. Please find a link to an NZSA article published early this morning. Might be of interest...
https://www.nzshareholders.co.nz/scrip-article/with-shareholders-like-this-who-needs-enemies/

Thanks Oliver. I agree with you totally. Minority shareholders are about to be shafted, I;m glad I got out a few months ago but I implore NZ shareholders not to hand this company over to the Chinese.

[Snoopy]

Good evening all. Please find a link to an NZSA article published early this morning. Might be of interest...
https://www.nzshareholders.co.nz/scrip-article/with-shareholders-like-this-who-needs-enemies/


Hi Oliver.

Good to have your summary of the situation. However in the interest of accuracy I feel a couple of comments on your wording are warranted. And as a reference I provide a link to the judgement against Alan Lai and Agria Singapore in New Zealand.
https://www.linz.govt.nz/sites/default/files/agria_judgement_20190404.pdf

From your article Oliver:
"Alan Lai (and Agria) reached a settlement with the US Securities and Exchange Commission that resulted in a fine and him being banned as a director for a period of five years in both the US and New Zealand. That also saw Agria forced to reduce its stake in PGW to below 50% by the Overseas Investment Office."

While the broad overview of your facts are correct, the way you have worded your sentence gives the impression that it was the USEC that stopped Alan Lai standing as a director in New Zealand for five years. From your referenced link they said this:
"Without admitting or denying the findings, Lai agreed to pay a $400,000 penalty and be barred for a period of five years from acting as an officer or director of any public company."

But the USEC has no jurisdiction in New Zealand. So they cannot have banned Mr Lai from standing as a director of PGW.

If you look at the separate New Zealand judgement under paragraph 75:
"c) Mr Lai has agreed not to assume directorship of PGW or the role of Chairperson of PGW until at least December 2023."

So Mr Lai was not banned as a director for all New Zealand companies for five years. That ban only applied to PGW, which is not how your article reads.

Again, while the gist of your second sentence is correct, it was actually Land Information New Zealand that brought the case against Mr Lai in New Zealand, using the Overseas Investment Act. It was the legal judgement against Mr Lai that forced him via Agria Singapore to reduce his PGW holding, not the OIO. Technically the Overseas investment Office was not involved in that legal action.
(Edit: As noted by Leemsip in post 5513 the 'Overseas Investment Office' (OIO) is contained under the umbrella of LINZ (Land Information New Zealand). So although LINZ is on paper the legal entity taking the case, it is not incorrect to say the OIO was taking the case.)

I make these comments not to nit pick, but because in matters of legality details do matter. And given you may have an important role at the upcoming special meeting, I wouldn't want to see you discredited for spreading misinformation.

SNOOPY

[Oliver Mander]

Thank you Snoopy. I do appreciate the distinction, it was simply difficult to write in a way that was readable. I will add an update as a footnote for the sake of clarity, and thank you for pointing this out.

[Leemsip]

Snoops, OIO is part of LINZ. OIO isn’t it’s own entity, would have been their guys representing LINZ tho

[Snoopy]

Snoops, OIO is part of LINZ. OIO isn’t it’s own entity, would have been their guys representing LINZ tho


Thanks Leemsip, I did not realise OIO is part of Land Information New Zealand. I had just assumed that because land is always a sensitive asset, that the prosecution by LINZ was taken on behalf of OIO, not realizing that the OIO was part of LINZ all the time and not a legal entity in its own right(?) I also realised that after the sale of the seed business and all of that associated sensitive trialing land out a Lincoln, plus the sale and leaseback of every commercial premises they could, that PGW today may not have much (or any?) sensitive land left. So I wondered if it would even be possible for LINZ to initiate a similar prosecution as they did in 2018 today?

SNOOPY

[Snoopy]

Good evening all. Please find a link to an NZSA article published early this morning. Might be of interest...
https://www.nzshareholders.co.nz/scrip-article/with-shareholders-like-this-who-needs-enemies/


The other point in your column that I found of interest Oliver was the selection and election of directors to represent minority shareholders.

I like the idea of shareholders being fully in control of this process. And as you point out, anyone can stand for election as a director. However on the few occasions I can remember when a genuinely independent director put their name forward for election to a company board, there was usually another note in the paperwork accompanying the voting papers to the effect that the incumbent directors do not support the nomination and that, by implication, you as shareholders, should not vote for such a person. This wasn't particularly surprising to me. Directors, after all, do all have to work together as a team. And having a rogue person elected to that team, however well meaning they might seem, might disrupt the boardroom dynamics in a way that is out of proportion to the mission of overall good governance of the company.

You ask who should determine a directors independent status? I had always understood that independent meant, apart from being in receipt of directors fees for doing their director's job, being someone with no other connection to the company's workforce, or a workforce of any associated company (*). IOW independence was a matter of legality, not personal preference of the independent shareholder nominator. I don't ever remember a case of a director standing for election in the sole interests of small shareholders, as nominated by a group of small shareholders. Well not one getting voted in anyway (maybe with the exception of our jonu at NTL). What I am suggesting is that such a thing is a rare event. An independent director is typically first selected by the board, rather than the shareholders directly.

As to your implied suggestion that only independent shareholders should be able to vote for independent directors, I like the idea of that. You talk about the non questioning of independence of gentailer directors James Miller, Prue Flacks or Mark Verbiest on the boards of Mercury or Meridian, as supported by the ‘in favour’ votes of minority shareholders (ie, when excluding the Crown vote). I was not clear whether you meant the crown deliberately withheld their vote, or whether despite the crown voting, these independent directors were almost unanimously supported by independent shareholders anyway. IMO, having the board put forward the names of 'independent directors', who can then only be elected by the minority shareholders with the majority shareholder abstaining, might be a better compromise for electing independent directors going forwards. And such a system would not prevent a genuinely unsanctioned independent candidate from standing as well, who might indeed have a better chance of success under such voting rules.

Whoever is elected as an independent director, does have a statutory duty to act to fairly represent minority shareholders, whatever role Agria played in electing those people. So I am not sure how Agria could operate -in practice- the "different corporate governance ethos" that you apparently fear.

SNOOPY

(*) One exception to this rule I would make is that independent directors are allowed to own shares in the company that they independently direct. That interest would be in alignment with an independent director sharing a shareholders perspective.

[Oliver Mander]

Snoopy, I am only partly in mobile range today - but I will post links to the submission we made to NZX during 2023 later today on advocating a minority interests regime. If you head to www.nzshareholders.co.nz and then the 'Submissions' menu you shoud be able to find it.

In addition, its likely to be a future feature of our own Director Independence policy. We're undertaking some consultation on that right now.

[Oliver Mander]

Snoopy, as promised - the link to NZSA's June 2023 submission.
Submission: NZX Consultation on Director Independence Policy Settings - New Zealand Shareholders' Association (nzshareholders.co.nz) (https://www.nzshareholders.co.nz/2023/06/submission-nzx-consultation-on-director-independence-policy-settings/04/32/)

[Snoopy]

I cut my expenditure with PGW by 90 percent and Farmlands by 30 percent. Just went without.

Whenever I did go to PGW, the car park was empty. So surprised that they have outperformed Farmlands.


Funny, I always had the impression that farmers/orchadists were either PGW customers or Farmlands customers but not both. Seems I was wrong! Would you be able to share with us Toddy why in December you cut your expenditure at PGW despotically (by 90%) but only brutally (by 30%) at Farmlands? Seems an odd asymmetry.

SNOOPY

[Sideshow Bob]

https://www.nzx.com/announcements/426867

PGG Wrightson Limited (PGW) today announced its results for the first half of FY24. Key items and metrics for the first six months to 31 December 2023 included:

❖ Operating EBITDA2 of $36.6 million (down $11.2 million or 24%).
❖ Revenue of $560.9 million (down $24.9 million or 4%).
❖ Net profit after tax of $12.7 million (down $8.4 million or 40%).
❖ Updated Operating EBITDA guidance of around $50 million for financial year to 30 June 2024.
❖The PGW Board has by a majority determined PGW will reinvest capital back into growing the business by suspending the interim dividend to avoid adding debt in the face of rising interest costs. The Board considers PGW has performed well in difficult market conditions impacting the primary sector and wider economy. It is recognised that uncertainties remain and it is prudent to wait until the full financial year is complete before reviewing the dividend payout ratio (if any).
❖ Recent levels of dividend have been at the upper end of the payout ratio for the sector and are not sustainable.

PGW Chair, Garry Moore said “the Company has traded solidly during the first half of the financial year in materially more challenging market conditions than experienced in recent years. Factors such as elevated levels of inflation and interest rates on rising debt levels, together with subdued demand and softer returns in most of New Zealand’s key primary export commodities, have all contributed to create a more demanding environment for many of PGW’s farmer and grower clients and there is a strong correlation between the fortunes of our clients and PGW.”

In terms of the key metrics, PGW delivered operating earnings before interest, tax, depreciation, and amortisation (“Operating EBITDA”) of $36.6 million (down $11.2 million or 24 per cent compared to the prior corresponding period). Revenue was $560.9 million (down $24.9 million or 4% per cent) and net profit after tax (NPAT) was $12.7 million (down $8.4 million or 40 per cent).

Moore went on to say “This half year result can be described as steady in the context of the headwinds the sector and the wider economy face. Our Retail & Water segment nevertheless traded well compared to the record high for the comparative period. Our Agency segment results were again impacted by the weak real estate market and softer commodity pricing particularly in sheep and lamb markets where prices were back 28 per cent year-on-year.

In response to these trading conditions PGW has been actively managing and reducing spend in a range of cost areas. At the same time, we have seen increases in costs through supplier price rises as evidenced by ongoing CPI increases.

Favourable climatic conditions in Australia in recent years have seen farmers build up their sheep flocks, with numbers estimated to be at their highest in 15 years. However, recent dry conditions in Australia have resulted in record slaughter numbers and were up 16 per cent from the previous year. This excess supply has negatively impacted farmgate sheep meat returns on both sides of the Tasman.”

It is useful to look at this result in the context of PGW’s performance through the economic cycles over recent years and we refer to our half-year results at an Operating EBITDA, revenue and NPAT level for the previous five years below (refer to graphs in attached announcement).

It is also informative to highlight PGW’s total shareholder return baselined against the S&P/NZ50G over this period. PGW has seen a total shareholder return movement of +93.08 per cent since the share consolidation in August 2019 following the sale of the PGW seeds business. This compares favourably to the S&P/NZ50G index movement of +8.44 per cent over the same period (refer to PGW’s Total Shareholder Return graph versus S&P/NZ50 Index in attached announcement).

“Despite the challenging environment PGW’s dedicated and knowledgeable team continue to deliver first class service and products to our clients, who appreciate the tailored advice they receive from our trusted store teams and reps in their fields and orchards.

Distributions | Ngā Utu Whaipānga

Given the current challenges faced in the sector and broader economy and the impacts these have had on our business, the PGW Board has determined not to pay an interim dividend. The Board considers that this is an appropriate and prudent measure to take at the present time. At a broader level the PGW Board is also assessing its ongoing dividend payout ratio given the need to strike the right balance between sustainable distributions for shareholders whilst retaining sufficient earnings in the best interests of the company to allow it to effectively execute upon its strategy.”

Retail & Water Group

PGW CEO, Stephen Guerin said, “The Retail & Water business incorporates Rural Supplies, Fruitfed Supplies, Water, and Agritrade. Operating EBITDA for Retail & Water was $40.0 million (down $9.0 million), and revenue was $478.3 million (down $21.7 million) on the prior corresponding period.

Farm and orchard spending indicators across the board continue to point downward. Although farmer and grower confidence has improved over the period, investment intentions have fallen to their weakest since the 1980s (excluding the first COVID-19 lockdown). This is a result of high interest rates, inflation, and a decline in both meat and milk commodity prices due to softer demand in export markets and the ongoing impact of Cyclone Gabrielle for our North Island clients in both the rural and horticulture sectors.

The professionalism and superior advice, service, and technical ability of our people continues to reinforce loyalty and attract new clients and underpins pleasing market share growth. We continue to build on PGW’s reputation of providing the best technical advice in our market and our customer research demonstrates strongly that this focus and market differentiating factor resonates well with our clients and remains a key component in our strategy as we hold and develop our market competitiveness.

In several sales categories, we have seen growth on last year’s record result. The standout range being General Merchandise which is continuing to grow year-on-year. This is a strong indicator of increasing foot traffic through our stores which is a testament to our team’s culture and client centric focus. Our goal of having the best trained people in the industry is widely understood and well recognised by our clients.

Customer focused innovation is one of our strategic pillars and we continue to invest in this area. During the period we introduced our self-funded research and development (R&D) model. We currently have a strong footprint in horticultural R&D and will expand this to the rural sector of our business, focusing on systems, programmes, and product focused R&D.

We continue to invest in our store network which further demonstrates our commitment to rural New Zealand and supporting farmers and growers across the length of the country.

Our Rural Supplies clients were not affected by the predicted impacts of the early onset of the El Niño dry season across the country as it did not materialise through the spring. There was a lot of rain for most areas during the critical spring months and with a prevalence of cooler temperatures. This led to increased grass cover and good feed reserves. The flow on effect of this has been reduced sales of stockfood and summer brassicas.

Our goal of having the best trained people in the sector is evident in the growth of our animal health offering where we are taking a proactive approach relating to the onset of drench resistance. Drench resistance is accelerating and the financial impact on sheep and beef farmers will be significant. PGW has proactively moved to get ahead of this challenge and provide market leading support and advice to our clients on this topic.

Fruitfed Supplies’ result for the first half was impacted by Cyclone Gabrielle, which occurred in February 2023. A number of our clients in Gisborne and Hastings lost large areas of crop and therefore required less product in the new season. Many clients lost their entire seasons crop last year causing cash flow impacts. Due to falling returns and the impact of the cyclone we have seen a slowing of horticultural development over the last 12 months as growers look to consolidate their existing businesses and remediate properties.

Returns in some sectors have been softer. The apple, avocado and kiwifruit industries have experienced weaker demand and declining returns, with prices for some crops at levels not seen for several years. These falling returns have resulted in the amount clients spend on some product lines reducing.

Agritrade, our wholesale business division, commenced a review of its business strategy with a focus on areas that generate value growth. The primary emphasis to date has been about optimising the supply chain dynamics with a goal of reducing customer order frequency and adding minimum order volumes. This reduction enhances operational efficiency by reducing operational overheads, greenhouse gas emissions and enhances customer service. Additionally, the focus has extended to identifying and addressing non-profitable products to ensure that our inventory better aligns with market demands and continues to contribute meaningfully to our revenue. These refinements of our model aims to position our wholesale business for sustained growth.

Tensions in the key Red Sea trade route are contributing to longer shipping times and higher freight costs for some products.
Agency Group

Our Agency group includes Livestock, Wool, and Real Estate. Agency delivered an Operating EBITDA of $1.4 million for the first six months of the 2024 financial year, a reduction of $2.2 million compared with the same period last year. Revenue was $81.6 million, down $3.1 million compared to the prior period.

Our Livestock business was impacted by the reduced volumes of livestock being traded, particularly North Island cattle and dairy, as high on-farm inflation, softer commodity prices, and elevated interest rates have led to more cautious purchasing. Poor lamb prices have squeezed commission revenue, with weaker Chinese demand and increased Australian supply causing prices to fall.

Our strong relationships with our clients contributed to maintaining our market share throughout these tough times. During the period we grew our supply chain partnerships and increased volumes.

GO-STOCK returns were up significantly compared to the prior period, reflecting the attractiveness of the product to clients. It remains a popular product for our clients, assisting them with their cash management and allowing capital to be used elsewhere.

bidr®'s growth in the first half of the year was assisted by the installation of weekly saleyard auctions at Stratford and Taranaki, as well as an increase in the number of on-farm hybrid auctions for commercial sheep and beef in the North Island.

The total number of wool bales sold was ahead of the same period last year. Although prices for strong wool remain supressed, it was encouraging to note increases in prices compared to last season. Top quality, well-prepared crossbred fleeces command premiums. Our market share especially in the fine wool market has grown on the back of profitable contracts offered to growers.

We grew our wool contract business which links wool growers with manufacturers domestically and internationally and provides growers with surety of price. We saw increased enquiries from domestic and international retail brands with a number of overseas clients visiting.

The New Zealand Real Estate market has endured a difficult time. North Island sales in particular have been low with the volume of transactions significantly back on the business transacted in FY21 and FY22.

Cashflow and Debt

Cashflow from operating activities saw a $6.8 million outflow; a $28.1 million improvement compared to the prior comparative period.

Although Operating EBITDA was $11.2 million lower than the comparative period the build in working capital for the Group of $36.1 million was $33.4 million lower than the prior six-month period. The Group received good collections from customers with overdue rates lower than 31 December 2022. In addition, income tax payments were also $7.7 million lower than the prior period, which included income tax payments on the record FY22 financial performance. Financing costs were $1.4 million higher as a consequence of higher interest rates.

Capital expenditure was $6.9 million, an increase of $0.7 million versus 31 December 2022 and included investment in our Business Improvement Programme.
The Group paid the FY23 Final dividend of 10 cents per share, or $7.8 million in October 2023.

Net interest-bearing debt was up $1.4 million compared to 31 December 2022 at $96.9 million.

The Group renewed and extended its bank facilities in December 2023 through to 2026.”

Outlook

Mr Moore noted, “PGW’s outlook remains cautious with the agricultural sector and international marketplace facing various challenges including the impact of El Niño conditions, lower meat pricing (in particular sheep and lamb), higher input costs, softer commodity pricing for primary exports, and subdued demand from our largest export market, China. The carry over impacts of Cyclone Gabrielle together with supply chain issues associated with offshore conflicts and higher interest costs are all contributing to temper the short-term outlook and prospects.

Sheep meat prices are at their lowest range in a decade with high volumes of Australian meat and weaker international demand. Whilst pressure on sheep pricing is anticipated to continue in the near term, there is an expectation we will see improved trading across the major stock types as the countryside dries and the current abundance of grass diminishes. Beef prices are expected to remain stable. Although beef farmers are more optimistic, there is concern about the year ahead which may translate into reduced investment.

Rising dairy prices have improved dairy farmer confidence in recent weeks with Global Dairy Trade auctions recording higher prices and increasing payout expectations. The removal of the remaining dairy tariffs on dairy exports to China allows New Zealand products to enter China duty free and providing an advantage over some international export competitors.

The outlook for horticulture is positive with good kiwifruit, apple and pear crops expected to be harvested. Kiwifruit is predicted to deliver improved quality fruit with higher volumes compared to last year. Wine exports are expected to reduce this season, then increase next season. Overall, horticulture is anticipated to produce stronger export volumes from this year's harvest without the impact of events such as Cyclone Gabrielle, with further growth into next year.

We see some positive signs in the real estate market as we move into 2024. Sentiment is improving, and current indications suggest that sales levels will grow in the months ahead, with more orchards poised to come on the market in autumn.

The NZ - EU Free Trade Agreement will progressively come into effect during 2024 providing improved access to the European markets.

Whilst the factors impacting market sentiment are mixed and slightly pessimistic in the near term, we are confident that PGW remains in a strong position to capitalise on opportunities as they arise and maintain the positive performance trend that PGW has demonstrated over the past five years. The longer-term prospects for the New Zealand primary sector remain strong with the Ministry for Primary Industries projecting steady growth.

While noting the green shoots of a recovery in our clients’ confidence in the sector, we remain cautious as to on-farm and on-orchard spend. We see a period of debt reduction by clients given the recent commodity pricing cycle and the ongoing recovery costs related to Cyclone Gabrielle for North Island clients.

On balance, we remain cautious and expect to see subdued activity over the remainder of the financial year. Given the mixed signals in the macroeconomic environment we have revised our forecast Operating EBITDA guidance for the year to 30 June 2024 to around $50 million.”

For media enquiries contact:

[bull....]

very prudent to cut div in this environment

[Toddy]

No surprise here. I also don't see farmers changing their spending habits in the current environment.

Farmlands and Wrightsons carparks in the Bay are still pretty quiet.

Share price overvalued?

[winner69]

Even though FY guidance down from that previously given pretty solid H2 forecasted with ebitda about the same as last years…..even though H1 was down 24%

Things must be getting better

[Balance]

Even though FY guidance down from that previously pretty solid H2 forecasted with ebitda about the same as last years…..even though H1 was down 24%

Things must be getting better

Guidance of $50m vs market consensus of $53m - so steady as she goes.

Cancelling the interim dividend however is unexpected. Not going to be popular with the dividend income investors who have funds invested in discretionary & non discretionary brokers' accounts (eg. Craigs & Forbar).

[kiora]

And not so popular with some on the board?

"❖The PGW Board has by a majority determined PGW will reinvest capital back into growing the business by suspending the interim dividend to avoid adding debt in the face of rising interest costs"

Tensions?
Good or bad for the company?

[Balance]

And not so popular with some on the board?

"❖The PGW Board has by a majority determined PGW will reinvest capital back into growing the business by suspending the interim dividend to avoid adding debt in the face of rising interest costs"

Tensions?
Good or bad for the company?

Good for the company imo as it shows that Agria (needing dividends) is not having its way. Could explain why there's a move against the independent directors - not good!

[iceman]

So here is the reason for the major shareholder wanting Board changes, purely motivated by their own needs, not what is best for PGW. I'm happy to be out of PGW
"Distributions
Given the current challenges faced in the sector and broader economy and the impacts these have had on our business, the PGW Board has determined not to pay an interim dividend. The Board considers that this is an appropriate and prudent measure to take at the present time. At a broader level the PGW Board is also assessing its ongoing dividend payout ratio given the need to strike the right balance between sustainable distributions for shareholders whilst retaining sufficient earnings in the best interests of the company to allow it to effectively execute upon its strategy.”

[bull....]

No surprise here. I also don't see farmers changing their spending habits in the current environment.

Farmlands and Wrightsons carparks in the Bay are still pretty quiet.

Share price overvalued?

yea i reckon pgw and skl are both overvalued at moment

[Toddy]

yea i reckon pgw and skl are both overvalued at moment

Skl have an attractive balance sheet though. So I don't see the sp coming under as much pressure as PGW.

[Snoopy]

Interesting to plug this new EBITDA guidance into the 'Consolidated Statement of Profit and Loss for FY2023' and the associated cost structures.

Consolidated Statement of Profit and Loss





FY2024 ForecastFY2023 Actual



Operating EBITDA
$52.000m$61.194m



less Depreciation and Amortisation Expense
$28.063m$28.063m


equals EBIT
$23.937m$33.509m


less Net Interest and Finance Costs
$9.573m$9.573m


equals Profit Before Income tax
$14.364m$23.936m


less Income Tax Expense$4.022m$6.418m


equals Profit Net of Income Tax$10.342m$17.518m



Now: $10.342m/75.484m= 13.7cps

As it happens 10.0cps has already been paid out during FY2023 as the final dividend for FY2022. So to keep that balance sheet intact, the final dividend paid during FY2024 (actually the interim dividend for FY2024) should be no more that 4cps. And 4cps is only a little down on the interim dividend paid in that same time space but a year earlier of 12cps. Hey, just a minute........




Guidance of $50m vs market consensus of $53m - so steady as she goes.

Cancelling the interim dividend however is unexpected. Not going to be popular with the dividend income investors who have funds invested in discretionary & non discretionary brokers' accounts (eg. Craigs & Forbar).


You forgot to mention that late last year PGW reduced their EBITDA guidance to $52m, so $50m is a second downgrade. What did you say about downgrades coming in threes? It would come as no surprise to me if the new $50m EBITDA guidance for the FY2024 year was not met. You also have to remember that traditionally most of the profit comes in the first half. So it wouldn't surprise me if PGW only breaks even on a NPAT basis for the year.

I was predicting an interim dividend of no more than 4c. So with rural conditions softening, it is no real surprise there is no interim dividend.

So am I selling out? Quite the reverse. I topped up my holding this morning. Looking through the next business cycle and averaging across the dividend stream, I reckon I am going to get a 10% gross yield. That is far too tasty a prize to leave on the table. Next plan is to free up some of my bank deposit money to buy some more.

SNOOPY

[RGR367]

................

So am I selling out? Quite the reverse. I topped up my holding this morning. Looking through the next business cycle and averaging across the dividend stream, I reckon I am going to get a 10% gross yield. That is far too tasty a prize to leave on the table. Next plan is to free up some of my bank deposit money to buy some more.

SNOOPY

As this one has been a long book-value-negative stock already in my portfolio, I might just follow you and further increase my holding also. SP is just too tempting not to.

[Toddy]

Very low volumes today. So hard to say what a fair price is.

[mike2020]

Very low volumes today. So hard to say what a fair price is.

No divs and when restarted change of div policy, who will actually be able to guess?

[Norwest]

Very low volumes today. So hard to say what a fair price is.

Not true. Today was the highest volume traded year to date and only 5 days had higher volume over the trailing 12 months. The volume was large by PGW standards today!

PGW is intrinsically low volume, which makes it hard for anyone with even a mid sized position to exit or enter at a price they want without affecting the market itself.

[Snoopy]

Very low volumes today. So hard to say what a fair price is.


No divs and when restarted change of div policy, who will actually be able to guess?

Well I put my order in a month ago, based on the last five years of earnings averaged out. So no guessing was required. The yield I was happy with determined the price I was willing to pay. You can't really say what the future dividend policy will be as I expect half the board to be removed shortly. Perhaps 'big Steve G' will be forced to walk the plank as well. If so this will be a pity, as my comparison with Elders (post 5493) shows, operationally PGW has performed well in difficult market circumstances.

But even if the dividend is reduced, this will be because PGW sees a better return in reinvesting some retained earnings back into the business. This I believe would be a good thing for shareholders, if the board deems this is the wisest use of the cash generated.

SNOOPY

[winner69]

Share price down another 9% to $2.63 ….about half what it was 2 years ago ..ouch

Guy from Hamilton Hinden Green said it appeared investors were losing confidence in the company as it faces tougher times ahead…….he obviously didn5 sound out Snoopy ….whose eager to buy even more at this price.

[nztx]

Could it all be a plan for Aria to fly in & clean up when the dust settles at a lower level ? ;)

[Snoopy]

Share price down another 9% to $2.63 ….about half what it was 2 years ago ..ouch

Guy from Hamilton Hinden Green said it appeared investors were losing confidence in the company as it faces tougher times ahead…….he obviously didn5 sound out Snoopy ….whose eager to buy even more at this price.


It is a cyclical Winner. Rural cyclicals always face tougher times ahead, then they recover. Always best to buy at the bottom of the rural cycle. But this cycle looks tougher than the last. Aussie farmers have killed NZ lamb prices. Milk price recovering but still well down on a year ago. Fruit yields lower. Selling farmland a struggle. And where's the beef?

https://www.youtube.com/watch?v=Ug75diEyiA0

Those US burger joint servings not as generous as they once were. But I have sussed my increasing stake in PGW. Shares always go down after I buy in. So buy a small addition. Wait for the share price to sink, then buy the number of shares you really want. Heh heh heh heh. I have this Mr Market guy figured out!

SNOOPY

[mike2020]

Snoopy I love pgw as much as any man can.that said I had set in my mind 2.80 as a buy but now I have shaved that a little under today's price. The only risk it is probably vulnerable to a take over. Either way long term you will be fine.

[Toddy]

Looks cheap at $2.33

[Snoopy]

I have decided the best capitalised valuation technique to use for PGW from a FY2023.5 perspective is a hybrid technique using normalised earnings (2HY2019.5, FY2020 and FY2021) and actual dividends paid (FY2022, FY2023 and HY2023.5). I am effectively using normalised (post restructuring) earnings as a proxy for dividends, because recent history has shown that PGW pay out all of their operational earnings as dividends.



Year
Dividends Paid 'per share'Sub TotalPGW Rural Servicing Normalised Earnings 'per share'


FY201912.5cps + 7.5cps20.0cps9.2cps+1.1cps (1)


FY20207.5cps + 9.0cps16.5cps9.9cps


FY20210.0cps + 12.0cps12.0cps23.6cps


FY202216.0cps + 14.0cps30.0cps32.6cps


FY202316.0cps + 12.0cps28.0cps23.0cps


FY202410.0cps + ?cps10.0cps?cps


Total FY2022 to FY2023.5 inclusive68.0cps


Total FY2019.5 to FY2021 inclusive34.6cps



Notes

1/ Total FY2019 earnings of 5.8cps were not distributed equally throughout the year. I have apportioned the 5.8cps of earnings over FY2019 by considering the NPAT for the 'Agency' and 'Retail & Water' for FY2019 and HY2019 (see Segmented Profit Section of each report) as follows.



Agency {A}Retail & Water {B}{A}+{B}


FY2019$9.600m$11.645m$21.245m


less HY2019$2.249m$16.728m$18.977m


equals 2HY2019$7.351m($5.083m)$2.268m



This means the total portion of 'Agency' and 'Retail & Water' profits earned in 2HY2019 was: $2.268m/$21.245m= 10.68%
0.1068 x 10.3c = 1.1cps

---------------------------

The total return I am capitalising over a period of five years is: 68.0c+34.6c= 102.6c. This works out to be 105.5c/5=20.5cps on average every year. Due to interest rates rising and forecast to be higher for longer, I am raising my required capitalised rate of return to 9.0% gross. I had considered raising that rate even further to 9.5%. However, due to the strong operational performance over the last couple of years reflected in PGW gaining market share and having a relatively stable and well thought of workforce, I thought the company had earned half a percentage point 'required return credit' when I set the required yield rate. Now what does a 9.0% required gross yield on 21.1c of annual payments imply for the share price?

20.5c/ (0.72x0.09) = $3.16

PGW closed at Friday 20th October at $3.42. Given the market share gains made by PGW over the last couple of years, perhaps such a growth premium of $3.42-$3.16= 26cps is justified (remember capitalised dividend valuation assumes zero growth) ? Yet despite the heady price falls from the $5.50+ share price peaks of a couple of years ago, I do not believe this share is 'cheap' at $3.42. I calculate the current year normalised historical PE ratio to be 342/24.1= 14.2. However, if the share price were to continue down toward, and maybe just under, that $3 mark? Then I think PGW would hit that share price point of 'good business cycle buying'.

SNOOPY

discl: holding

I have decided the best capitalised valuation technique to use for PGW from a FY2024 perspective is a hybrid technique using normalised earnings (FY2020 and FY2021) and actual dividends paid (FY2022, FY2023 and FY2024). I am effectively using normalised (post restructuring) earnings as a proxy for dividends, because recent history has shown that PGW pay out all of their operational earnings as dividends. Higher historical dividends paid out above earnings are not valid forecasting data points for PGW with its current balance sheet.



Year
Dividends Paid 'per share'Sub TotalPGW Rural Servicing Normalised Earnings 'per share'


FY20207.5cps + 9.0cps16.5cps9.9cps


FY20210.0cps + 12.0cps12.0cps23.6cps


FY202216.0cps + 14.0cps30.0cps30.4cps


FY202316.0cps + 12.0cps28.0cps24.1cps


FY202410.0cps + 0.0cps10.0cps?cps


Total FY2022 to FY2024 inclusive68.0cps


Total FY2020 to FY2021 inclusive33.5cps




---------------------------

The total dividend return I am capitalising over a period of five years is: 68.0c+33.5c= 101.5c. This works out to be 101.5c/5=20.3cps on average every year. My required capitalised rate of return for PGW is 9.0% gross. This is the highest return I require for any of my sharemarket investments. The reason for this is the rural sectors' underlying swings between good and bad seasons muddying the multi year income picture. I had considered raising that required return rate even further to 9.5%. However, due to the strong operational performance of PGW over the last couple of years, compared to say Elders in Australia, reflected in PGW gaining market share and having a relatively stable and well thought of workforce, I thought PGW had earned that 'half a percentage point' 'required return credit' when I set the required yield rate.

Now what does a 9.0% required gross yield on 20.3c of annual payments imply for the share price?

20.3c/ (0.72x0.09) = $3.13

PGW closed on Tuesday 5th March at $2.31, a massive 26.2% discount to fair value of my 'market cycle capitalised dividend valuation'. We don't yet know what the profit figure will be for FY2024, because the financial year does not end until 30th June 2024. What I am prepared to say is that NPAT will be much reduced and, on a PER basis, that 'today Mr Market valuation of PGW' at $2.31 may even look expensive. Investors used to the 'rural cycle' will look through this and realise that the markets are 'forward looking'. Eventually that forward view will be looking at better times. Not as good as when the returns for milk, beef, lamb and horticulture all hit that magic sweet spot together over FY2021 and FY2022. But better than today where the rural market gloom has not been this bad since Roger Douglas ripped the rug of government support from the farming community thirty five years ago. The real discount to fair value is probably less than the 26.2% that I calculate. But for those willing to take a forward view a little further forward than Mr Market, I believe that PGW at around $2.30 represents a once in five year accumulation opportunity. In fact, I am calling PGW a 'BUY' (rather than an accumulate) at these prices.

SNOOPY

discl: holding and accumulating

[kiora]

But when will it get back to where it was?
https://www.marketscreener.com/quote/stock/PGG-WRIGHTSON-LIMITED-6497113/finances/

[Snoopy]

But when will it get back to where it was?
https://www.marketscreener.com/quote/stock/PGG-WRIGHTSON-LIMITED-6497113/finances/


Nice website graphics, although after I clicked around a bit trying to find out who was the 'one analyst' they took the view from to present their 'averaged results' (an average of one, lol!) it froze on me.

If you mean when will the share price get back above five bucks as it was in early 2022 when all of the commodity prices aligned, then I would say 'never'. But fortunately the share price does not have to get back there for shareholders buying in today to make a buck. Before the referenced website froze me out, I recall the forecast dividend returns for FY2025 and FY2026 were pretty miserable (5% or so). Now I am not saying whoever made those forecasts will definitely be wrong. But it would be interesting to know what the assumptions were behind those forecasts.

What I am sure about is that with Agria and Mr Lai as the largest PGW shareholder, he will not stand for such returns. Something will have to change. Will the finance portfolio, whoops sorry I mean 'GoLivestock' be sold off (again)? Will Fruitfed be sold off? Remember years ago, Friutfed was a separate very successful listed company. And Fruitfed is probably the business unit least integrated in terms of cross selling opportunities to other PGW business units?

What I do know is that agricultural commodities fluctuate in price and that those prices do not all stay down forever. As for when they will recover and to what extent I do not know. But I don't have to know that. I can simply buy PGW shares today and wait until they do. I have enough mostly fully imputed income from the other 11 shares in my NZX portfolio to 'wait it out', until those dividends start flowing from PGW again in some form.

SNOOPY

[blackcap]

Isn't this an Elders takeover target?

[kiora]

Try this
From Marketscreener

https://www.marketscreener.com/quote/stock/PGG-WRIGHTSON-LIMITED-6497113/finances/

[Snoopy]

Isn't this an Elders takeover target?

Here is what Elders said about their intention for their PGW stake in December 2022.



There was a follow up to the announcement yesterday, at the Elders AGM today. From the Chairman's address:

"The business development pipeline for the coming year, is encouraging with numerous successful businesses expected to join Elders in the next 12 months and furthering our growth."

"As announced yesterday, to further our geographic diversification, we have also taken an 11.3% interest in PGG Wrightson Limited, the New Zealand based rural services business, which was acquired by private sale. Elders does not intend to initiate a proposal to acquire control of PGW, however it does support our diversification strategy as part of our pureplay agribusiness."

So 'no bid' is to be brought to the table for other PGW shareholders.


Of course you would say: 'They would say that.'

But if you take a look at the Elders FY2023 annual report, net debt is up significantly from $294.m to $463.3m. Debt ratio at Elders at EOFY2023 balance date was $A463.3m/$A1,315.2m=$35.2%. Current PGW market cap is $NZ175m. So I would say at a bare minimum $A200m would be needed to get the PGW board to even consider a takeover offer. That would take the Elders debt ratio to ($A463.3m+$A200m)/($A1,315.2m+$A200m)=$43.8%, even if the purchase was made at NTA. That looks high for a rural services business, and I think Elder's bankers would have something to say about such debt levels! Particularly when PGW are looking at profits possibly evaporating this financial year. That doesn't leave much incremental money to fund the interest component of any acquisition by Elders. And I suspect potential savings from trans-tasman synergies would be minimal.

Would Elders shareholders stomach a cash issue to acquire the remainder of PGW? From AR2023, Elders seem much more focussed on investing in their supply chain (by buying out their suppliers) and automating their wool handling services with Australia. I just can't see an appetite for Elders acquiring PGW at this time, and it would all be dependent on Alan Lai being a willing seller anyway. In this case, I tend to believe the released narrative: That a significant stake in PGW became available - courtesy of the Chinese government - and Elders decided to take it on to add to their geographic diversification.

SNOOPY

[Snoopy]

Try this
From Marketscreener

https://www.marketscreener.com/quote/stock/PGG-WRIGHTSON-LIMITED-6497113/finances/


I think you misunderstand me. That link works, as it is the same one you gave me before. But after a certain time a screen comes up which says I have had my viewing trial and if I want to see more I have to join up by submitting my e-mail address.

The thing is if, as an analyst, you are doing a forecast, then you have to make assumptions about the future business environment and how the business you are doing your forecast on fits into that bigger picture. For PGW it might be:

1/ Sheep prices remain low for the next few financial years due to stock expansion in Australia, and the slaughter of the sheep milking stock in New Zealand.
2/ Beef prices rise by 10% as tourism recovers worldwide benefitting high end cuts and burgers become a larger part of the diet of the increasingly poor, time poor, working poor.
3/ Growers have adapted to El Niño and gold kiwifruit in particular are forecast to increase in size by 5% and in price by 5% per kilo leading to a 10% rise in fruit returns over two years.
4/ The NZD/USD exchange rate is predicted to be broadly stable over the next two years.
5/ In this market, PGW is predicted increase market share by a further 2%.

Now I have no inkling that any of the above will certainly come to pass. But if these are the assumptions behind a forecast model of my own, based on the above, then others can use their own experience to judge how likely my predictions are liable to come true, and therefore consider the likely accuracy of my forecasts. Whoever that analyst was in the marketscreener summary, I could find no information about what the thinking was behind hiser forecast. The 'over time view' suggested a temporal adjustment to future forecasts by simply following the share price up or down, after the event. I have little to no time for such forecasts, and no inclination to 'join up' to marketscreener, so I can view a 'with hindsight' pretty picture, that simply takes this years totals and adds 5% to those figures annually to present a picture of what will happen two years out.

The reason I prefer 'capitalised dividend' valuations is that the only assumption I am making is that the business performance will 'revert to the mean'. For PGW, a mature cyclical business, this assumption seems reasonable to me. I would love to know what assumptions that other analyst is using. But I guess I will never find out. As far as I am concerned that makes the marketscreener forecast useless, even if the uselessness is displayed in an attractive format.

SNOOPY


,

[Agrarinvestor]

Dear all,

My real name is Heiko Koenig. I am a German based investor of AGRIA since 2012. As you may known , Agria was delisted in 2016 because of the wrong doings of CEO Alan Lai.
Over the years i show patience and hoped that the company will find a solution for shareholders like me. I own 70.000 shares of AGRIA.
Alan, and some of his Agria friends want to become Members of the Board of PGW. I want to talk directly via email to the current Board Members.
Can anyone give me a hint,how to find these addresses? You can send it as a private message to sharetrader .nz, or to my email address heiko_koenig@freenet.de


regards Heiko

[iceman]

Dear all,

My real name is Heiko Koenig. I am a German based investor of AGRIA since 2012. As you may known , Agria was delisted in 2016 because of the wrong doings of CEO Alan Lai.
Over the years i show patience and hoped that the company will find a solution for shareholders like me. I own 70.000 shares of AGRIA.
Alan, and some of his Agria friends want to become Members of the Board of PGW. I want to talk directly via email to the current Board Members.
Can anyone give me a hint,how to find these addresses? You can send it as a private message to sharetrader .nz, or to my email address heiko_koenig@freenet.de


regards Heiko

https://app.companiesoffice.govt.nz/companies/app/ui/pages/companies/142962/directors

[Oliver Mander]

Afternoon all,

Please note the announcement made by PGW this afternoon.
NZSA proposed resolutions for special meeting - NZX, New Zealand’s Exchange (https://www.nzx.com/announcements/427691)

NZSA is interested in ensuring a fair outcome for shareholders in PGW. Due to the size of the Agria shareholding, however, your vote as a shareholder - no matter how small - really matters.

You'll see that we are proposing some resolutions of our own, including due consideration of a minority inverests voting regime.

Feel free to get in touch with any questions or comments.
Oliver

[mshierlaw]

Afternoon all,

Please note the announcement made by PGW this afternoon.
NZSA proposed resolutions for special meeting - NZX, New Zealand’s Exchange (https://www.nzx.com/announcements/427691)

NZSA is interested in ensuring a fair outcome for shareholders in PGW. Due to the size of the Agria shareholding, however, your vote as a shareholder - no matter how small - really matters.

You'll see that we are proposing some resolutions of our own, including due consideration of a minority inverests voting regime.

Feel free to get in touch with any questions or comments.
Oliver

I am pleased you have taken this stand. My proxy has been signed sealed & delivered.

[audiav]

Afternoon all,

Please note the announcement made by PGW this afternoon.
NZSA proposed resolutions for special meeting - NZX, New Zealand’s Exchange (https://www.nzx.com/announcements/427691)

NZSA is interested in ensuring a fair outcome for shareholders in PGW. Due to the size of the Agria shareholding, however, your vote as a shareholder - no matter how small - really matters.

You'll see that we are proposing some resolutions of our own, including due consideration of a minority inverests voting regime.

Feel free to get in touch with any questions or comments.
Oliver
Hi Oliver, I usually give NZSA proxy vote for each holding when I get notified of a meeting. Will this happen with this meeting? ie can I just wait for an electronic notification and assign NZSA as proxy? (Apologies for lazy question)

[ronaldson]

Afternoon all,

Please note the announcement made by PGW this afternoon.
NZSA proposed resolutions for special meeting - NZX, New Zealand’s Exchange (https://www.nzx.com/announcements/427691)

NZSA is interested in ensuring a fair outcome for shareholders in PGW. Due to the size of the Agria shareholding, however, your vote as a shareholder - no matter how small - really matters.

You'll see that we are proposing some resolutions of our own, including due consideration of a minority inverests voting regime.

Feel free to get in touch with any questions or comments.
Oliver

Oliver - I am not a holder but read the PGW announcement and supporting materials. I fully support NZSA's actions and rationale, together with the related change suggested on a broader basis to better protect minority shareholdings in all NZX listed entities. Well overdue in my opinion.

[iceman]

Afternoon all,

Please note the announcement made by PGW this afternoon.
NZSA proposed resolutions for special meeting - NZX, New Zealand’s Exchange (https://www.nzx.com/announcements/427691)

NZSA is interested in ensuring a fair outcome for shareholders in PGW. Due to the size of the Agria shareholding, however, your vote as a shareholder - no matter how small - really matters.

You'll see that we are proposing some resolutions of our own, including due consideration of a minority inverests voting regime.

Feel free to get in touch with any questions or comments.
Oliver

Well done Oliver.

[Oliver Mander]

Hi audiav...not a lazy question in the slightest!
Yes, you are of course welcome to do that. I sent the link to our standard Computershare form only because right now, there is notice of meeting (nor proxy form) available.

Oliver

[Snoopy]

I always get a little tetchy about companies that have had a 'golden run' and seemingly load themselves up with debt. What happens when the market conditions turn?
I feel it is worth having a closer look at PGW as weather events and commodity prices create a bit of 'on the ground' havoc. My first task is to look at how the GoLivestock 'don't call it a finance division Trev' loans, err I mean 'advances' are going.

Looking at AR2023, this 'GoLivestock' unit has 'advances' on the books of $71.829m+$2.570m = $74.399m (not accounting for the provision of $376k, ref AR2023 p81) as at the 30-06-2023 balance date.

Yet $74.399m is an overstatement of the loan, ahem advance book on an annual basis. Livestock advances are essentially seasonal (although I am curious to know where that $2,570m of non-seasonal GoLivestock balance has come from) . To get a representative 'advances' balance over the year, it is best to take an average of the three 'advances' balance data points across FY2023 that we have: 30-06-2022 ($66.019m) , 31-12-2022 ($43.011m) and 30-06-2023 ($74.023m):

The triangulated averaged GoLivestock balance over FY2023: ($66.109m+$43.011m+$74.023m)/3 = $61.048m

We should note -in passing- that the interest earned on these 'GoLivestock' 'advances' over FY2023 was $6.573m. Based on that averaged 'advances' balance, this represents a gross return to PGW shareholders of:

$6.573m/$61.048m = 10.8%

That is a very nice little income stream for we shareholders. BUT -and here is my very important learning point- it is not the income on that loan (darn it there is that word I wasn't allowed to use) that is taking the risk out of these loan transactions. It is the value of the livestock, that PGW still own, that is the security on this debt. And according to the auditors (AR2023 p104), the security on that livestock loan portfolio looks A.O.K.. (albeit with $375k of provisions taken out).

So a fairly strong asset position and strong income position may be found under PGW's GoLivestock umbrella over FY2023. Just don't call it a finance division Trev!


Management were a little concerned at the half year reporting date on the propensity of company debt to blow out, as interest rates remain high. So concerned that they canned the interim dividend, with no promise of a final dividend either. Have things really got that bad? Time to take a closer look.

My first task is to look at how the Go Livestock 'don't call it a finance division Trev' loans, err I mean 'advances' are going.

Looking at HYR2024, this 'Go Livestock' unit has 'advances' on the books of $40.578m+$0.158m = $40.736m (not accounting for any provisioning which is not separately declared) as at the 31-12-2023 balance date.

Yet $40.736m is an understatement of the loan, ahem I mean 'advance book', on an annual basis. Livestock advances are essentially seasonal. To get a representative 'advances' balance over the half year, it is best to take an average of the two book ended 'advances' balance data points across HY2024 that we have: 30-06-2023 ($74.023m) and 31-12-2023 ($40.736m):

The averaged Go Livestock balance over HY2024: ($74.023m+$40.736m)/2 = $57.380m

We should note -in passing- that the interest earned on these 'Go Livestock' 'advances' over HY2024 was $4.003m (HYR2024 p20). Based on that averaged 'advances' balance, this represents an annualised gross return to PGW shareholders of:

2x$4.003m/$57.380m = 14.0%

I guess I should have checked with the PGW company usurer before I published that figure, but I do believe it is correct. Blimey, I am starting to feel sorry for our livestock farmers now, but that is a very nice little income stream for we shareholders. YET -and here is my very important learning point- it is not the income on that loan (darn it there is that word I wasn't allowed to use) that is taking the risk out of these loan transactions. It is the value of the livestock, that PGW still own, that is the security on this debt. And according to the auditors (AR2023 p104), the security on that livestock loan portfolio was checked:
"(We) considered beef and sheep meat commodity price movements up to and after balance date to assess whether these changes, which are indicative of changes in the value of livestock security held for Go Receivables, are an indicator of any further credit risk of Go Receivables."

Just as well the auditors weren't sniffing around at the half year date and weren't there to notice the (from HYR2024 p4)
"softer commodity pricing particularly in sheep and lamb markets where prices were back 28 per cent year-on-year."

isn't it? Thank goodness those auditors never read threads on this forum!

SNOOPY

[Snoopy]

We have established that the 'Go Livestock' receivables should not be considered as part of PGW company debt. So how does the underlying debt position of PGW stack up to scrutiny?



Debt Position PGW
EOFY2023


Cash On Hand
($4.643m)


add Short Term Bank Loans
$19.960m



add Long Term Bank Loans
$50.000m


add Net Defined Benefit Liability (Pension Plan deficit)
$1.076m


add Employee Entitlements
$19.944m



Total Bank and Worriesome Liabiliities
$86.327m



less Animal assets (annualised average)
($61.048m)


Total Net Debt
$25.279m



One tweak I might need to make on the above table is to put a 'fudge discount factor' on the value of PGW's animal assets. The above table is treating animals as 'cash in the bank' which might be a little optimistic. Then again that animal value is the value of the animal as bought at auction - not when it has been fed up six months down the track. So maybe I don't need any fudge factoring? I would welcome others comments on whether my overall picture of PGW debt is now more realistic. For me, accounting for the PGW animal assets in this way, puts the overall PGW debt picture in a more realistic light. $25.279m of net debt sounds a lot better than $86.327m! Nevertheless that $25.279m is a lot more net debt than the $10.119m that was on the books only a year ago, when the outlook for PGW was brighter.


We have established that the 'Go Livestock' receivables should not be considered as part of PGW company debt. So how does the underlying debt position of PGW stack up to scrutiny?



Debt Position PGW
EOHY2024


Cash On Hand
($13.307m)


add Short Term Bank Loans
$65.000m



add Long Term Bank Loans
$45.190m


add Net Defined Benefit Liability (Pension Plan deficit)
$2.132m


add Employee Entitlements (1)
$19.944m



Total Bank and Worriesome Liabiliities
$119.259m



less Animal assets (semi-annualised average)
($57.380m)


Total Net Debt
$61.879m



Notes

1/ Not separately declared at the half year. In the absence of up to date information, I have rolled over the full year figure.

----------------------

One tweak I might need to make on the above table is to put a 'fudge discount factor' on the value of PGW's animal assets. The above table is treating animals as 'cash in the bank' which might be a little optimistic. Then again that animal value is the value of the animal as bought at auction - not when it has been fed up six months down the track. So maybe I don't need any fudge factoring? In this case, as long as the weight of the lambs on farm has increased by 39% since being bought at auction for fattening, that is the weight increase needed to compensate for a 'fall per kilo' in the money received of 28%. Could a farmer add that much weight (39%) to a lamb in just a few months? I would love to know.

At first glance that 'blow out' in net debt of: $61.879m - $25.279m = $36.6m over just six months looks alarming. But it is part of a pattern of buying in stock (both 'for the shelf' and literal live animal stock) over the first half of the year and selling it off in the second. So I doubt that the EOFY2024 balance date blowout in debt (if any) will be $36.6m. Yet for wider context, even $25.279m of EOFY2023 net debt is a lot more net debt than the $10.119m that was on the books at EOFY2022, when the outlook for PGW was brighter.

SNOOPY

[Snoopy]

The next task is to work out what the profit margin is on these GoLivestock loans. To work that out, we need to calculate PGW's bank loan 'borrowing costs' as a percentage of bank funds borrowed. The borrowing costs over FY2023 were $5.521m (AR2023 p74). Once again we will use our three time stamp data points to average the funds borrowed across the year.



Reference Date30/06/202231/12/202230/06/2023


Cash & Cash Equivalents($4.676m)($2.484m)($4.643m)


Short Term Debt$7.500m$48.000m$19.960m


Long Term Debt$30.000m$50.000m$50.000m


Total Net Debt$32.824m$95.516m$65.317m



=> Average Debt over Year = ($32.824m+$95.516m+$65.317m) / 3 = $64.552m

So the interest rate charged by the banks on the funds loaned was: $5.521m / $64.552m = 8.6%. We know from part 1 of this analysis that the return on funds loaned by PGW was 10.8%. The difference between the borrowed and lent loan rates, multiplied by the average GoLivestock loan balance, is the NPBT earned by PGW from these GoLivestock loans:

(0.108-0.086)x $64.552m = $1.420m.

Of course it is likely that PGW earns a commission on the buying and selling of this animal stock via its own sale-yards as well. But such a commission would likely have been earned whether the animal stock was financed by PGW or not. It is the financing risk we are interested in here. It is only the $1.420m that is directly connected to that.

The $1.420m of profit earned on the funding aspect of the GoLivestock loans is taxable. The associated after tax profit figure was: 0.72 x $1.420m = $1.023m.

Now from the 'Consolidated Statement of Profit and Loss'', the declared profit for FY2023 was $17.518m. We can think of this $17.518m as money available to pay down debt, if the banks demanded that debt be fully repaid (in general this is a hypothetical situation).



The next task is to work out what the profit margin is on these GoLivestock loans. To work that out, we need to calculate PGW's bank loan 'borrowing costs' as a percentage of bank funds borrowed. The borrowing costs over HY2024 were: $3.367m + $0.485m = $3.855m (HYR2024 p25). we will use our two time stamp data points to average the funds borrowed across the half year.



Reference Date30/06/202331/12/2023


Cash & Cash Equivalents($4.643m)($13.307m)


Working Capital Debt$19.960m$65.000m


Long Term Debt$50.000m$45.190m


Total Net Debt$65.317m$96.883m



=> Average Debt over Six months = ($65.317m + $96.883m) / 2 = $81.100m

So the annualised interest rate charged by the banks on the funds loaned was: 2x $3.855m / $81.100m = 9.5%. We know from part 1 of this analysis that the return on funds loaned by PGW was estimated at 14.0%. The difference between the borrowed and lent loan rates, multiplied by the average GoLivestock loan balance, is the annualised NPBT earned by PGW from these GoLivestock loans:

(0.140-0.095)x $57.380m = $2.582m.

Of course it is likely that PGW earns a commission on the buying and selling of this animal stock via its own sale-yards as well. But such a commission would likely have been earned whether the animal stock was financed by PGW or not. It is the financing risk we are interested in here. It is only the annualised $2.582m that is directly connected to that.

The $2.582m of annualised profit earned on the funding aspect of the GoLivestock loans, or $1.291m of half year profit, is taxable. The associated after tax half profit figure was: 0.72 x $1.291m = $0.930m.

Now from the 'Consolidated Statement of Profit and Loss'', the declared profit for HY2024 was $11.949m.
The 'Consolidated Statement of Profit and Loss'', statements for FY2023 and HY2023 allow us to calculate the declared profit for the declared profit for 2HY2024:
$17.518m - $21.158m = ($3.640m), which was a loss

This means the declared consolidated net profit after tax for the twelve months ended 31-12-2023 was just: $11.949m - $3.640m = $8.309m

We can think of this $8.309m as money available to pay down debt, if the banks demanded that debt be fully repaid (in general this is a hypothetical situation).

SNOOPY

[Snoopy]

We now have enough information to do our two alternative MDRT (Minimum Debt Repayment Time) calculations. Note the 'old way' assumes all of that livestock loan debt is just company debt (not realistic IMV).

MDRT (old way) = (Total Worrisome Debt) / (Declared NPAT) = $86.327m/$17.518m = 4.93 years

MDRT (new way) = (Total Worrisome Debt - Seasonally Adjusted 'GoLivestock' Debt) / (Declared NPAT - GoLivestock NPAT)
= ($86.327m - $61.048m) / ($17.518m - $1.023m) = 1.53 years

------------------------------

My rule of thumb for the MDRT answer in years is:

years < 2: Company has low debt
2< years <5: Company has medium debt
5< years <10: Company has high debt
years >10: Company debt is cause for concern

That means my revised modelling has seen PGW drop from what I had classed as a 'medium debt' company back to a 'low debt' company. And because PGW works in a turbulent sector like agriculture, this is good to see.

Looking out into FY2024, I can see that MDRT figure deteriorating. But at this point I would not be concerned about that. It is something that I would expect as more rural commodities head toward their cyclical market lows.



We now have enough information to do our two alternative MDRT (Minimum Debt Repayment Time) calculations. Note the 'old way' assumes all of that livestock loan debt is just company debt (not realistic IMV).

MDRT (old way) = (Total Worrisome Debt) / (Declared NPAT) = $119.259m/$8.309m = 14.4 years

MDRT (new way) = (Total Worrisome Debt - Seasonally Adjusted 'GoLivestock' Debt) / (Declared NPAT - GoLivestock NPAT)
= ($119.259m - $57.380m) / ($8.309m - 2x$0.930m) = 9.60 years

------------------------------

My rule of thumb for the MDRT answer in years is:

years < 2: Company has low debt
2< years <5: Company has medium debt
5< years <10: Company has high debt
years >10: Company debt is cause for concern

My revised modelling has seen PGW drop from what I had classed as a 'cause for concern debt' company back to a 'high debt' company. Nevertheless whichever interpretation of MDRT you choose, the result is not particularly reassuring, The MDRT figure for FY2023.5 has deteriorated as I expected. But I do find the extent of the deterioration startling. But such a trend is something that I would expect, as more rural commodities head toward their cyclical market lows.
Are the banks keeping a closer eye on this situation than PGW management are letting on? If so, it means the cancellation of the dividend is quite understandable.

SNOOPY

[Snoopy]

MDRT (new way) = (Total Worrisome Debt - Seasonally Adjusted 'GoLivestock' Debt) / (Declared NPAT - GoLivestock NPAT)
= ($119.259m - $57.380m) / ($8.309m - 2x$0.930m) = 9.60 years

------------------------------

My rule of thumb for the MDRT answer in years is:

5< years <10: Company has high debt



Before someone 'pulls me up' I have to admit to being a bit lazy (see part of quoted post highlighted in bold). What I have done is calculated the annual GoLivestock NPAT for the mixed year incorporating 2HY2023 and HY2024 by simply doubling the profit from HY2024. Given the difference in GoLivestock profit margins that I have calculated for FY2023 and HY2024, this is likely to have overstated the profits made by GoLivestock over the period. As a consequence of that, it means the profits for the remainder of the business are slightly understated. That is turn means the MDRT figure that I have calculated is likely to be slightly worse than the actual figure. However, before someone gives me a 'bad rep' for being lazy, may I present my defence.

The whole business of claiming that I can calculate an interest rate being paid, by simply looking at:

a/ the loan balance at the start AND
b/ loan balance at the end

-of a particular period- is fraught. The problem is you can't really know what the average outstanding loan balance is by looking at two snapshot data points. You really have to know what all the loan balance movements are during the period under examination as well. And such information is not published. An extreme example would be if the GoLivestock loan balance was completely repaid on 01-07-2023 (the day after balance date) and then suddenly renewed on 30-12-2023 (the day before half year balance date). In that situation the average loan balance outstanding per day would be close to zero, despite the GoLivestock loan balance being correctly listed as $74.023m (EOFY2023 figure) and $40.736m (EOHY2014 figure) in the respective full year and half year annual reports. What I am saying here is that the whole process of estimating an average outstanding loan balance by just looking at the start and end points is fraught. So to get caught up in the minutiae of calculation detail when you know the whole process is likely significantly error ridden by matter of 'information available' is actually wasting precious analysis time. In this case, particularly when my result slightly overstates (not understates) the real MDRT risk, I think my analysis process being 'near enough' is 'good enough'.

SNOOPY

[Snoopy]

Three years on and with the trading position of PGW going into more difficult times, a reassessment of the Senior Debt Coverage Ratio (SDCR) is in order. We will look at the 30th June balance date first. The cash balance (offsetting debt) together with the long term company debt and short term company debt come straight from the balance sheet. The operating EBITDA figure is from the Consolidated Statement of Profit and Loss.

Senior Debt Coverage Ratio" (SDCR) ="Senior Debt"/EBITDA
=( -$4.643m + $19.960m + $50.000m ) / $61.194m = 1.07 < 3.00 (very good)

So all looking very good then, EXCEPT, these figures are not what they seem. The "Senior Debt"/EBITDA hurdle was set up in pre IFRS 16 days. IFRS 16 mandates the transfer of rent from what was an operating expense to a finance expense, an operation that inflates the EBITDA figure accordingly. That means if we make the adjustment to a comparable pre IFRS 16 figure, by removing the 'interest paid on lease liabilities' and 'repayment of principal portion of of lease liabilities' (both figures may be found in the cashflow statement), then the comparable EBITDA figure reduces to this:

$61.194m - ( $3.800m + $19.532m ) = $37.862m

This is not the end of the adjustment exercise, unfortunately. This is because the the EBITDA figure quoted includes income from the 'GoLivestock' financing operation, the liabilities of which I have not included in the debt picture. It follows then that if I am not including 'GoLivestock' debt in this exercise, I must also exclude any income associated with that debt. So what is the interest revenue associated with 'GoLivestock'? $6.573m (AR2023 p71). That has to come off the EBITDA figure as well.

$37.862m - $6.573m = $31.289m

That means the adjusted Senior Debt Coverage Ratio calculation becomes:

=( -$4.643m + $19.960m + $50.000m ) / $31.289m = 2.09 < 3.00 (good, but no longer very good)

Looking out into FY2024, investors might want to consider what might happen if EBITDA reduces further in FY2024, while debt remains at today's levels. But that couldn't happen, could it?


The above quoted information is from AR2023, relating to FY2023.

MDRT is one thing. But real bankers take more notice of other debt measures like SDCR: Senior Debt Coverage Ratio" (SDCR) ="Senior Debt"/EBITDA
Here we look at the indicator information on the 31st December 2023, otherwise known as the half year 2024 balance date, that relates directly to SDCR.

-----------------------

a/ The cash balance (offsetting debt) together with the long term company debt and short term company debt come straight from the balance sheet:

Net Senior Debt @EOHY2024 = 'Cash on Hand' + 'Short Term Bank Debt' + 'Long Term Bank Debt' = ($13.307m) + $65.000m + $45.190m = $96.833m

b/ The operating EBITDA figures below are taken (or calculated) from the respective 'Consolidated Statement(s) of Profit and Loss'. We need to adjust for the IFRS16 treatment of rent, which was changed from an operating expense to a separate finance expense and depreciation expense. Both of these changes artificially increase the EBITDA figure as reported in line with current accounting standards. (For reference purposes only, I have also produced the equivalent figures from the previous 'composite year').



Composite Year 2HY2022+ HY2023FY2022HY2022=> 2HY2022 {A}HY2023 {B}{A}+{B}


EBITDA$67.153m$47.428m$19.725m$47.844m$67.569m


less Interest Paid on Lease Liabilities$3.786m$1.896m$1.890m$1.908m$3.798m


less Depreciation of Property Lease assets$18.873m$9.291m$9.582m$9.566m$19.148m


equals pre-IFRS16 equivalent EBITDA$44.494m$36.241m$8.253m$36.370m$44.623m





Composite Year 2HY2023+ HY2024FY2023HY2023=> 2HY2023 {A}HY2024 {B}{A}+{B}


EBITDA$61.194m$47.844m$13.350m$39.962m$53.312m


less Interest Paid on Lease Liabilities$3.800m$1.908m$1.892m$1.920m$3.812m


less Depreciation of Property Lease assets$19.532m$9.566m$9.996m$10.256m$20.252m


equals pre-IFRS16 equivalent EBITDA$37.862m$36.370m$1.462m$27.786m$29.248m




c/ Next we need to adjust the EBITDA figure further downwards by removing the 'GoLivestock' income stream from overall EBITDA The EBITDA figure quoted includes income from the 'GoLivestock' financing operation, the liabilities of which are represented by livestock assets valued at $40.376m @EOHY2024. I have used the asset value of the the live animals on the PGW balance sheet as representative of the 'GoLivestrock' debt taken on, which has been passed across to farmers as 'GoLivestock' customers, the temporary guardians of these PGW owned animals. I have subtracted this 'finance debt' ($40.376m) from the overall debt picture (see calculation below), as it distorts the underlying operational debt position of the company..

It follows then, that if I am not including 'GoLivestock' debt in this exercise, I must also exclude any associated denominator income stream (interest revenue from the farmer) associated with that 'GoLivestock' debt. So what is the interest revenue associated with 'GoLivestock'? I am estimating this to be 2X$4.003m=$8.006m (refer posts 5555 and 5559). ThIs $8.006m I have removed from the EBITDA figure.


Senior Debt Coverage Ratio" (SDCR) ="Net Senior Debt"/EBITDA
=( $96.833m - $40.736m ) / ($29.248m - $8.006m) = 2.64 < 3.00 (pass test)

-----------------------------------


Looking out into FY2024, investors might want to consider what might happen if EBITDA reduces further in FY2024, while debt remains at today's levels. The headline EBITDA for the full year FY2024 is already expected to decrease to $50m. So you wouldn't want debt to go up as your forecast income goes down. I am now wondering if dropping the dividend was seen as a necessary response to the current business climate, rather than being an expression of the board just being prudent?

SNOOPY

[Snoopy]

When debt and earnings are lumpy, as they are at PGW, sometimes it is useful to look at covenants over more than one period. I have used my annual report and half year report collection to compile semi-annual earning periods over the last two and one half years, as below:



Half year EBITDA over timeHY2024
2HY2023
1HY20232HY20221HY2022


EBITDA (quoted) (1)$39.962m
$13.350m$47.844m$19.725m$47.428m


less Lease liability Interest payment
$1.920m$1.892m (2a)
$1.908m$1.890m (2b)$1.908m


less Lease liability principal payment
$10.256m$9.966m (3a)
$9.566m$9.582m (3b)$9.291m


less GoLivestock Income
$4.003m$3.837m (4a)
$2.736m$2.460m (4b)$1.794m


equals EBITDA (with bank covenant calculation adjustments)
$23.783m-$2.345m
$33.634m$5.793m$33.805m



Notes

1/ EBITDA half year calculations may be found in post 5560

2/ Calculations for Lease liability interest payments for the second half year.
2a/ $3.800m-$1.908m=$1.892m.
2b/ $3.786m-$1.896m=$1.890m

3/ Calculations for Lease liability supplementary depreciation charge for the second half year.
3a/ $19.532m-$9.566m=$9.996m.
3b/ $18.873m-$9.291m=$9.582m

4/ Calculations for GoLivestock income for the second half year.
4a/ $6.573m-$2.736m=$3.837m.
4b/ $4.254m-$1.794m=$2.460m

---------------------------------

I can use the above table to look at how the SDCR stacks up over the 12month period made up of 2HY2022 and 1HY2023 as an example.
Note that the 'Senior Debt' as at HY2023 was: -$2.484m (cash) + $48.000m (current bank debt) + $50.000m (non-current bank debt) = $95.516m. (Reference HYR2023 'Interim Consolidated Statement of Financial Position'). From this total I remove the 'animal assets' (I use as a proxy for the GoLIvestock debt, the value of the assets funded by that debt) as represented on the balance sheet ($43.001m). I do this because if all the animals on the balance sheet were sold at one time, then this portion of the company debt would disappear. This means that the debt on the balance sheet associated with these animals is not underlying PGW company debt, as, in theory, it can be repaid at any time.

For compound year HY2023+2HY2022: Senior Debt Coverage Ratio" (SDCR) ="Senior Debt"/EBITDA
= ($95.516m - $43.001m) / ($33.634m+$5.793m) = 1.33 < 3.00

For FY2023 (HY2023+2HY2023): Senior Debt Coverage Ratio" (SDCR) ="Senior Debt"/EBITDA
= ((-$4.643m + $19.960m + $50.000m) - $74.303m) / ($33.634m-$2.345m) = -0.287 < 3.00

I think it is interesting to compare the first calculation above with the same calculation performed on the equivalent period one year later:

For compound year HY2024+2HY2023: Senior Debt Coverage Ratio" (SDCR) ="Senior Debt"/EBITDA
= ($96.833m - $40.736m) / ($23.783m - $2.345m) = 2.62 < 3.00

Using this method, we can see that the SDCR ratio, taken three times across twelve months, was highly seasonal. On the actual end of financial year date (30th June 2023 ) it was a negative number. Any negative number indicates that should PGW choose to unwind all of their livestock lending, all of their company borrowings could be repaid in full, making the company 'debt free'. Of course if PGW did elect to do this, it would also mean winding up their 'GoLivestock' lending program. Since this is a growing profitable part of the PGW business, the chances are they would not want to wind up 'GoLivestock'. But such a conjecture does give another perspective on the true underlying debt position of the PGW company nevertheless. Move forwards by six months and the SDCR ratio jumps dramatically to a figure double that of the previous seasonal high twelve months prior. This looks awkward. If that SDCR ratio leaps again in December 2024, our SDCR debt covenant might be busted. This is clearly a situation the board will need to keep careful watch over going forwards. But there is no reason to panic - yet.

SNOOPY

[Davexl]

$2.10 / $2.11. Tempting to average down, even in a downtrend. How much lower can it go with Agria meeting / vote uncertainty ?
Too many questions...

[kiora]

Never touched it but sad
Too many questions alright DL

Chart looks sick,sick as !

Something big brewing ?

[Davexl]

Never touched it but sad
Too many questions alright DL

Chart looks sick,sick as !

Something big brewing ?

With Agria needing dividends potentially bleeding PGW dry over time as Snoopy points out, and Elders contemplating an amazing opportunity to diversify further (and possibly be a white knight against Agria) we all live in interesting times.
The time of maximum uncertainty could be fast approaching (after waiting for US inflation announcement).

[Snoopy]

Never touched it but sad
Too many questions alright DL

Chart looks sick,sick as !

Something big brewing ?


Check out the size of the trades. The largest trade through today at a steady price ($2.11 in this case) was 10,046 shares between 11:36am and 11:46am. Those shares were spread over 5 trades. So on average, that comes out to just over 2,000 shares or $4,220 per trade. The largest single parcel trade was at 11:52am: 3,886 shares valued at $8,160. There is not big money being traded here. Most of the trades look like they are fractional parcel trades from bots. I don't think you can read anything much into today's trading action.

I bought the rest of my incremental holding at $2.30 a couple of days ago. That represents a 30% discount on the 9.0% gross yield I was after across the business cycle. I am very happy with that. As it turns out, if I had waited until today, then I could have bought some of those shares 20c cheaper. But I am not worried about picking bottoms. I am more concerned about FOMO. I reckon this share could rise to $3 again from here in the short term as fast as the price collapsed - in just one day. I would have been really annoyed with myself if I had left such a PGW share purchase discount on the table (see post 5540) without acting.

SNOOPY

[Snoopy]

I am vacillating as to whether to incorporate the set up cost for the banking facilities as part of the interest payment or not.

The interest payments have a dual role in this calculation. One as the interest payment that PGW must make to their banking syndicate (rather obviously), with the second role being the cost base for the 'GoLivestock' loans that I am required to remove from EBITDA as a cost of doing the finance side of the business (because all operational costs of doing business should be removed when EBITDA is calculated). Time to restore the 'GoLivestock Interest Cost' figure back to just the interest cost, not including the banking facility set up cost? Not now.

I call it the 'Go Livestock Interest Cost'. But actually it is a cost derived from the interest paid on the combined short and long term bank loans. You could argue that those loans belong to PGW in general, and are not specific costs that are to be matched up against 'GoLivestock' income. I would argue that it is best not to think like that, because the 'stock loaned against' numbers have gone up with the 'GoLivestock' loan book going up in value. That means it would be possible to pay off all company debt should the GoLivestock program be completely wound down (EOFY2023 perspective). History has shown that to work through retailing business cycles, having no company debt (disregarding all of the retailers lease agreements which are quite onerous enough in themselves) can be smart business practice. So I think it is reasonable to consider at the full year balances date, the retail and agency arms of PGW as 'debt free company divisions', with an add on finance division ('GoLivestock'), which does carry an appropriate level of debt.

Post 5476 gives an indicative cost of funds rate of 7.1% (this figure excludes the bank facility set up costs, and is 'interest only') on an average debt balance of $64.552m. In funding cost terms, this translates to a dollar amount of: 0.071 x $64.552m = $4.583m over the year. We now have the information needed to complete our bank covenant equation.

FCCR= [(EBITDA - 'GoLivestock Interest Cost'] / [Total Interest(less interest income in cash)+ Banking Facilities Charge+(Lease Expenses)]

= [$61.194m - $4.583m] / [($4.565m-$0.485m)+$0.956m+($3.800m+$19.532m)] = 2.0 which is just equal to the targeted 2.0 figure.

All good then. But with a covenant like this going 'so close to the wire', you do wonder what would happen if the EBITDA falls as forecast over FY2024.


Attempt 4 is quoted above. My previous three attempts before that, and the direct link to attempt 4, may be found here:

Attempt 1: https://www.sharetrader.co.nz/showthread.php?2923-PGW-PGG-Wrightson&p=1027106&viewfull=1#post1027106
Attempt 2: https://www.sharetrader.co.nz/showthread.php?2923-PGW-PGG-Wrightson&p=1027408&viewfull=1#post1027408
Attempt 3: https://www.sharetrader.co.nz/showthread.php?2923-PGW-PGG-Wrightson&p=1027483&viewfull=1#post1027483
Attempt 4: https://www.sharetrader.co.nz/showthread.php?2923-PGW-PGG-Wrightson&p=1027803&viewfull=1#post1027803

Different assumptions I have tried and dropped. To be clear on the calculation inputs that I have finally settled on (which may be right or may be wrong, but at least you the reader will have a definite reference post for where my numbers have come from), I have pulled together what I have done, putting all the inputs into this post.

To reprise, FCCR is the other 'monetary covenant hurdle' that bankers like to talk about, but PGW does not.

FCCR= [(EBITDA - 'GoLivestock Interest Cost'] / [(Total Net Interest Paid+ Banking Facilities Charge)+(Lease Expenses)]

To reprise the ingredients for this calculation:
a/ The EBITDA figure used to be required to be adjusted to add back the depreciation on property leases and the interest repayment charge on property leases (the equivalent of the old pre-IFRS16 'rent', which under IFRS16, became two split 'finance expense(s)'). Since IFRS16 has been adopted, these costs are automatically added back into the EBITDA total. So there is no longer a need to manually add them back into the equation. The EBITDA figure, as printed in the annual report, is the figure to use.

b/ The 'GoLivestock Interest Cost' figure is the net interest earnings cost base, and does not include the banking facility set up cost (notwithstanding the total finance cost is actually derived from the interest paid on the combined short and long term bank loans). The reason it has to be removed is because PGW is, in effect, a hybrid retail and finance company. The financial structure of a 'finance company' is different to that of a 'retailing company', because the debt levels of the former are secured against the assets owned by finance company borrowers. Thus we need to decouple the finance assets and liabilities from the company operating statistics, to get a true picture of the borrowings of the underlying retail business.

c/ Total net interest paid including the banking facility arrangement set up charges. See AR2023 Note 6 "Net Finance and Interest Costs."

d/ Lease expenses. See AR2023, consolidated statement of cashflows.

From post 5476: Average All Company Debt over Year = ($32.824m+$95.516m+$65.317m) / 3 = $64.552m
=> Underlying 'interest only' charge rate is $4.565m / $64.552m = 7.1%
Average 'GoLivestock' loan balance over year = ($66.109m+$43.001m+$74.303m) / 3 = $61.138m
=> Underlying 'interest cost' for GoLivestock loans is 0.071 x $61.138m = $4.341m

FCCR= [(EBITDA - 'GoLivestock Interest Cost'] / [(Total Net Interest Paid+ Banking Facilities Charge)+(Lease Expenses)]

= [$61.194m - $4.341m] / [($4.565m-$0.485m+$0.956m)+($3.800m+$19.532m)] = 2.0 which is just equal to the targeted 2.0 figure.

All good then. But with a covenant like this going 'so close to the wire', you do wonder what would happen if the EBITDA falls as forecast over FY2024.

SNOOPY

[Snoopy]

The 'GoLivestock Interest Cost' figure is the net interest earnings cost base, and does not include the banking facility set up cost (notwithstanding the total finance cost is actually derived from the interest paid on the combined short and long term bank loans). The reason it has to be removed is because PGW is, in effect, a hybrid retail and finance company. The financial structure of a 'finance company' is different to that of a 'retailing company', because the debt levels of the former are secured against the assets owned by finance company borrowers. Thus we need to decouple the finance assets and liabilities from the company operating statistics, to get a true picture of the borrowings of the underlying retail business.

Total net interest paid including the banking facility arrangement set up charges. See HYR2023 Note 1 and AR2023 Note 6 "Net Finance and Interest Costs."
For 2HY2023: ($4.565m-$0.485m+$0.956m) - ($1.974m-$0.201m+$0.470m+$0.020m) = ($2.591m-$0.284m+$0.486m+$0.020m) = $2.813m

Lease expenses. See HY2023 and AR2023, consolidated statement of cashflows.
For 2HY2023: ($3.800m+$19.532m)-($1.908+$9.566m)= $1.892m+$9.966m = $11.858m

Average All Company Debt over 2HY2023 = ($95.516m+$65.317m) / 2 = $80.417m
=> Underlying 'interest only' charge rate is $2.591m / $80.417m = 3.22% over 6 months or 6.44% annualised
Average 'GoLivestock' loan balance over 2HY2023 = ($43.001m+$74.303m) / 2 = $58.652m
=> Underlying 'interest cost' for GoLivestock loans is: 0.5 x 0.0644 x $58.652m = $1.877m

SNOOPY

[nztx]

Oliver - I am not a holder but read the PGW announcement and supporting materials. I fully support NZSA's actions and rationale, together with the related change suggested on a broader basis to better protect minority shareholdings in all NZX listed entities. Well overdue in my opinion.


Agree with you there too

[Toddy]

As long as there are no unintended consequences. I. E the tail ends up wagging the dog scaring away international capital investment into our small and mid cap companies.

The NZX is really struggling for capital in this environment.

[Snoopy]

What has happened to this indicator at the half year update time? The following calculation is annualised by looking at two half year periods: 2HY2023 and HY2024. Supporting calculations may be found in posts 5561, 5567 for 2HY2023 and in HYR2024 (half year ended 31st December 2023) for HY2024.

FCCR= [(EBITDA - 'GoLivestock Interest Cost'] / [(Total Net Interest Paid+ Banking Facilities Charge)+(Lease Expenses)]

The ingredients for this calculation are as follows:

a/ The EBITDA figure used to be required to be adjusted to add back the depreciation on property leases and the interest repayment charge on property leases (the equivalent of the old pre-IFRS16 'rent', which under IFRS16, became two separate 'finance expense(s)'). Since IFRS16 has been adopted, these costs are automatically added back into the EBITDA total. So there is no longer a need to manually add them back into the equation. The EBITDA figure, as printed in the annual report, is the figure to use.

b/ The 'GoLivestock Interest Cost' figure is the net interest earnings cost base, but this figure does not include the banking facility set up cost (notwithstanding the total finance cost is actually derived from the interest paid on the combined short and long term bank loans). The reason it has to be removed from the quoted EBITDA total, is because PGW is, -in effect-, a hybrid retail and finance company. The financial structure of a 'finance company' is different to that of a 'retailing company', because the debt levels of the former are secured against the assets owned by finance company borrowers. Thus for a finance company, the risk associated with debt is different. That is why we need to decouple the finance assets and liabilities from the PGW operating statistics, to get a true picture of the borrowings of the underlying retail and agency business.

c/ For 'Total net interest paid' including the banking facility arrangement set up charges, see HYR2024 Note 1 AR2023 Note 6 "Net Finance and Interest Costs."

d/ For 'Lease expenses', see HYR2024 and AR2023, and the respective 'Consolidated statement(s) of cashflows' (or post 5561).

Average All Company Debt over HY2024 = ($65.317m+$96.833m) / 2 = $81.075m
=> Underlying 'interest only' charge rate is $3.367m / $81.075m = 4.2% or 8.3% annualised
Average 'GoLivestock' loan balance over HY2024 = ($40.736m+$74.303m) / 2 = $57.519m
=> Underlying 'interest cost' for GoLivestock loans is 0.5 x 0.083 x $57.519m = $2.387m

FCCR= [(EBITDA - 'GoLivestock Interest Cost'] / [(Total Net Interest Paid+ Banking Facilities Charge)+(Lease Expenses)]

= [($39.962m+$13.350m)-($2.387m+$1.877m)]
/ [($3.367m+$2.591m)+($0.485m+$0.486m))+(($1.920m+$1. 892m)+($10.256m+$9.966m))]

= [($53.312m)-($4.264m)]
/ [($5.958m)+($0.971m)+(($3.812m)+($20.222m)] = 1.58, which is below the targeted 2.00 figure.


Now, I am not sure if this covenant applies at the half year balance date, which is the time snapshot I have taken. PGW has always been a seasonal business, with more inventory on the balance sheet at the half year balance date on 31st December. By the time the full year balance date rolls around around, typically a quarter of that 'summer inventory balance' has been converted to cash, and hopefully profit. If this were all true, then I would have expected the 'Retail and Water' segment of PGW to have higher EBITDA in the second half. Strangely EBITDA for 'Retail & Water' seems to have fallen into a pattern of being lower in the second half, the opposite of what I would have expected. Are PGW in the habit of quitting shop stock 'at a loss' in the second half, to restore their cash position at the end of the year? Surely PGW are not that poor at matching their inventory to customer demand? But what other explanation could there be?

SNOOPY

[Snoopy]

FCCR= [(EBITDA - 'GoLivestock Interest Cost'] / [(Total Net Interest Paid+ Banking Facilities Charge)+(Lease Expenses)]

The big question: What has caused the slump in the FCCR indicator (down from 2.00 to 1.58) from a 31st December 2023 (HY2024) perspective, relative to six months prior?
EBITDA of PGW as a whole is weighted towards the first half of PGW's income year. The subdued start for FY2024 (EBITDA down from $47.428m to $39.586m, a drop of $7.842m - or 16.5% - on the equivalent half year prior period HY2023) is weighing on the 'income' (numerator) side of the FCCR. Meanwhile the net interest rate bill expense side (part of the FCCR denominator) actually fell in a climate of rising interest rates interest rates! But that was thanks to a foreign exchange derivative gain, probably not to be repeated. There was only a small rise (+3.1%) in 'lease expenses' between 'FY2023' and 'Compound year 2HY2023+HY2024' too , another part of the FCCR expenses (denominator). But remember when talking about 'lease expenses', post IFRS16, these are already incorporated in the declared EBITDA. So you could argue that lease expenses are close to neutral as far as FCCR is concerned, because they are found in both the numerator and denominator of this FCCR metric. That means it looks like the fall in FCCR can be almost entirely explained by the 16.5% fall in EBITDA over the first half in the PGW financial year (or second half of my composite financial year).

This 'numerator fall' is exaggerated in this particular calculation, by the higher proportion of EBITDA coming from 'GoLivestock' and the accompanying higher wholesale funding costs from both 'more money being borrowed' and the concomitant 'higher interest rate costs' that PGW is now paying to access those 'loan supporting' borrowed funds for their 'GoLivestock' product.

Amongst this deteriorating financial outlook, you would have expected PGW's banking syndicate to be getting a bit cautious. Maybe they might 'sink the lid' on the amount of capital that PGW can borrow gradually over time, to ensure a disciplined pay back of debt? But no, the opposite has happened. From HYR2024 p26
"On 22nd December 2023 the syndicated bank facility agreement was amended and restated with an effective date of 19 January 2024."
-Term debt facilities are now permitted to grow to $100m (+$10m), with this facility maturing on 27 February 2026. (Amount drawn on this facility @31-12-2023 was $45.19m).
-Working capital facilities are now permitted to grow to $85m (+$15m), with this facility maturing on 27 February 2026. (Amount drawn on this facility @31-12-2023 was $65m).

To put this new 'revised PGW credit limit' into context, the total dividend payout over FY2023 was $21.712m. So it looks like there is plenty of headroom ($55m in long term debt facilities) for a 'new board' -should they be elected- to 'borrow to pay a dividend' - should they so choose, even if the company makes zero NPAT this year. Interesting!

SNOOPY

[Snoopy]

This 'numerator fall' is exaggerated in this particular calculation, by the higher proportion of EBITDA coming from 'GoLivestock' and the accompanying higher wholesale funding costs from both 'more money being borrowed' and the concomitant 'higher interest rate costs' that PGW is now paying to access those 'loan supporting' borrowed funds for their 'GoLivestock' product.


I am still a bit uncomfortable about the above part of my analysis, even after five attempts to 'get it all right'. Should I have accelerated the numerator fall in this way? Right now I still think yes, but.....
When in doubt, try using the same method on a different slice of data. So I have decided to do an historical backtrack, this time looking at the historical compound year '2HY2022+HY2023'. That is the year immediately before the '2HY2023+HY2024' compound year that I have just looked at. That means it will make an interesting dataset for comparison. I need to process some more 'background data' first to enable my analysis to proceed.

The 'GoLivestock Interest Cost' figure is the net interest earnings cost base, and does not include the banking facility set up cost (notwithstanding the total finance cost is actually derived from the interest paid on the combined short and long term bank loans). The reason it has to be removed is because PGW is, in effect, a hybrid retail and finance company. The financial structure of a 'finance company' is different to that of a 'retailing company', because the debt levels of the former are secured against the assets owned by finance customers as borrowers. Thus we need to decouple the finance assets and liabilities from the company operating statistics, to get a true picture of the borrowings of the underlying retail business.

Total net interest paid including the banking facility arrangement set up charges. See HYR2022 Note 1 and AR2022 Note 6 "Net Finance and Interest Costs."
For 2HY2022: ($0.957m-$0.099m+$0.875m) - ($0.358m-$0.029m+$0.420m) = ($0.599m-$0.070m+$0.455m) = $0.984m

Lease expenses. See HYR2022 and AR2022, consolidated statement of cashflows.
For 2HY2022: ($3.786m+$18.873m)-($1.896+$9.291m)= $1.890m+$9.582m = $11.472m

Average All Company Debt over 2HY2022 = ($46.887m+$32.824m) / 2 = $39.856m
=> Underlying 'interest only' charge rate is $0.984m / $39.856m = 2.47% over 6 months or 4.94% annualised
Average 'GoLivestock' loan balance over 2HY2022 = ($35.805m+$66.109m) / 2 = $50.957m
=> Underlying 'interest cost' for GoLivestock loans is: 0.5 x 0.0494 x $50.957m = $1.259m

SNOOPY

[Snoopy]

The following calculation is annualised by looking at two half year periods: 2HY2022 and HY2023. Supporting calculations may be found in posts 5560, 5572 for 2HY2022 and in HYR2023 (half year ended 31st December 2022) for HY2023.

FCCR= [(EBITDA - 'GoLivestock Interest Cost'] / [(Total Net Interest Paid+ Banking Facilities Charge)+(Lease Expenses)]

The ingredients for this calculation are as follows:

a/ The EBITDA figure used to be required to be adjusted to add back both the depreciation on property leases and the interest repayment charge on property leases (the equivalent of the old pre-IFRS16 'rent', which under IFRS16, became two separate 'finance expense(s)'). Since IFRS16 has been adopted, these costs are automatically incorporated within the EBITDA total. So there is no longer a need to manually add them back into the equation. The EBITDA figure, as printed in the annual report, is the figure to use.

b/ The 'GoLivestock Interest Cost' figure is the net interest earnings cost base, but this figure does not include the banking facility set up cost (notwithstanding the total finance cost is actually derived from the interest paid on the combined short and long term bank loans). The reason it has to be removed from the quoted EBITDA total, is because PGW is, -in effect-, a hybrid retail and finance company. The financial structure of a 'finance company' is different to that of a 'retailing company', because the debt levels of the former are secured against the assets owned by finance customer borrowers. Thus for a finance company, the risk associated with debt is different. That is why we need to decouple the finance assets and liabilities from the PGW operating statistics, to get a true picture of the borrowings of the underlying retail and agency business.

c/ For 'Total net interest paid' including the banking facility arrangement set up charges, see: HYR2023 Note 1, AR2022 Note 6 "Net Finance and Interest Costs."

d/ For 'Lease expenses', see HYR2023 and AR2022, and the respective 'Consolidated statement(s) of cashflows' (or post 5561).

Average All Company Debt over HY2023 = ($32.824m+$95.516m) / 2 = $64.170m
=> Underlying 'interest only' charge rate is $1.974m / $64.170m = 3.1% or 6.2% annualised
Average 'GoLivestock' loan balance over HY2023 = ($43.001m+$66.109m) / 2 = $54.555m
=> Underlying 'interest cost' for GoLivestock loans is 0.5 x 0.062 x $54.555m = $1.691m

FCCR= [(EBITDA - 'GoLivestock Interest Cost'] / [(Total Net Interest Paid+ Banking Facilities Charge)+(Lease Expenses)]

= [($47.844m+$19.725m)-($1.691m+$1.259m)]
/ [($1.974m+$0.599m)+($0.470m+$0.455m))+(($1.908m+$1. 890m)+($9.566m+$9.582m))]

= [($67.569m)-($2.950m)]
/ [($2.573m)+($0.925m)+(($3.798m)+($19.148m)] = 2.44 > targeted 2.00 figure.

I have done the calculations out of order. But the three comparative posts I would like readers to focus on are this one (5573), 5566 and 5570. In three annualised reporting windows over a twelve month period, by my calculations the FCCR has gone from 2.44(HY2023) to 2.00(FY2023) to 1.58(HY2024). The number 2.00 is the trigger point where incoming cashflows cover outgoing cashflows twice over. Leveraging up further by 'borrowing to pay a dividend', even though this allowed by the borrowing covenant disclosures we know about, will increase interest costs and cause the FCCR to deteriorate further. Did the PGW board really have a choice as to whether they suspended dividend payments or not? The deterioration in this metric over just one year is telling me they didn't.

SNOOPY

[Snoopy]

The forecast dividend returns for FY2025 and FY2026 were pretty miserable (5% or so). Now I am not saying whoever made those forecasts will definitely be wrong. But it would be interesting to know what the assumptions were behind those forecasts.

What I am sure about is that with Agria and Mr Lai as the largest PGW shareholder, he will not stand for such returns. Something will have to change.


Lai Guanglin, aka Alan Lai, makes his position behind the current board fracas known.
https://www.nzherald.co.nz/business/agria-takes-aim-at-pgg-wrightsons-performance-pushes-to-return-alan-lai-to-board/5NYZ4NR6LBBU3D77BB3JBOAOFM/

The article, dated 14th March, is pay-walled and not being an Aucklander I don't have a subscription. No problem I thought. I will simply hike on down to the public library and look up the digital copy of the print edition. Well I did that and looked through the 14th and 15th March copies of the Herald only to find it was not in either edition. So it looks like this reference is to a 'digital edition only' article. I wasn't aware that the Herald did that.

The first sentence of the article (the only bit visible to non-subscribers) reads:
"PGG Wrightson's biggest shareholder, Singapore Agria, says it is agitating for board changes, because the rural services company's financial performance is not up to scratch...."

I am guessing Mr Lai is referring to the cutting of the dividend. But if there is another key point in the rest of the text of the article, I would be grateful if a subscriber could let the forum know. I am not asking for a cut and paste of the article here (that would be a copyright breach). I am just asking if there is a key point I have missed.

If Mr Lai is right, then all the board can realistically do is sack the CEO. That IMO would be a mistake. Because if you look through the current underlying rural downturn (no-one likes to see profits fall after all) and look at how CEO Steve Guerin is driving the company, compared to his equivalent compatriots at the co-operative Farmlands, and -casting the net wider- to the CEO of Elders in Australia (refer post 5493), then I think Steve has been performing relatively well.

SNOOPY

[winner69]

Not much new Snoops. Has this statement from Agria ….rest is about what our Oliver says

Extract

In a statement supplied to the Herald, Agria took aim at PGW’s performance.

“While there are some small signs of performance improvement in one or two business lines, the last four years has seen inconsistent and declining business performance,” the company said.

“As a result, shareholders including Agria are seeing the ongoing erosion of value – market capitalisation, share price, dividends, international sales and demand, margins, and increasing debt levels.”

Agria acknowledged the work of the board to lead and govern “through these challenging years” but said the company now required a different skill set to improve its business performance.

“Regrettably, the business metrics and facts speak for themselves and in the best interests of the company, Agria believes an updated and new set of skills is required to arrest the four-year financial decline of PGG Wrightson.”

[mike2020]

About 4 years since the sale of the seeds division. Which anyone involved with PGW would have told you was a mistake.

[Snoopy]

There is only one 'crossover year' (FY2018) in the above referenced post with this one. However results for FY2018 in this post have been restated to include only those from the NZ based farm service business. The seed business, now sold, has been removed from the profit figures in this post.



Profit Normalisation table
FY2022FY2021FY2020FY2019FY2018
Reference


Declared Profit
$24.286m$22.720m$7.133m$4.510m$9.004m


less (add) Fair Value Gains (Losses) net of Impairments
0.72x$2.182m0.72x($1.832m)0.72x$0.807m0.72x$3.187m 0.72x$1.086m
AR Note 5


less (add) Foreign Exchange Gains (Losses)
0.72x($0.430m)0.72x$0.094m0.72x($0.178m)0.72x($0.8 12m)
0.72x$1.035m
AR Note 6


less (add) Standardbred Business Profit (closed business unit)
($0.707m)Post 5341


less (add) IFRS16 adjustment
0.72x($0.613m)0.72x($0.613m)0.72x($0.027m)
Post 5347


less (add) Non operating gains (losses)
0.72x($0.699m)0.72x($4.456m)0.72x($0.132m)0.72x$2. 170m0.72x$7.024m
AR Note 4


equals Normalised Profit
$24.603m$17.819m$7.471m$7.782m$14.881m





Notes

1/ I don't believe there is sufficient disclosure in AR2022 to allow us to calculate an IFRS16 profit adjustment for FY2022. In the absence of this, I have rolled forward the IFRS16 adjustment for FY2021 into FY2022, assuming it to be the same.
2/ Earnings per share calculations (below) have been adjusted to take into account the 9th August 2019 10:1 share consolidation, reducing the number of shares on issue to 75.484 million.


Earnings Per Share Calculations

FY2018: $14.881m / 75.484m = 19.7c
FY2019: $7.782m / 75.484m = 10.3c
FY2020: $7.471m / 75.484m = 9.9c
FY2021: $17.819m / 75.484m = 23.6c
FY2022: $24.603m / 75.484m = 32.6c

The extraordinary drop in profits between FY2018 and FY2019 had me diving back to my FY2019 annual report to see what went wrong.

From AR2019 p5.
"Reflecting on FY2019, we believe it was one of the most operationally challenging of recent years. Farmer confidence in parts of the agriculture sector remains subdued, constraining farm spending and therefore our revenue for the year. This has also been evident in recent months with a discernible tightening of the credit environment"

From AR2019 p6:
"The impact of mycoplasma bovis (present in NZ since mid-2017) was felt across the livestock and rural supplies business. Most particularly with reduced dairy herd settlements, a reduction in tallies, a softening in demand for dairy beef and and a more cautious approach to spending in the dairy sector across a range of farm inputs."
"Market conditions continued to challenge both our Real Estate and Wool businesses with results down on last year."

That all seems like a reasonable 'excuse'. But I guess it reflects the view that when the dairy industry catches a cold, it is hard for the rest of the farmers in NZ in other sectors to make up the lost income. Two down years in a row is enough to sink this test result.

Conclusion: Fail Test


I am not going through the full 'Buffett' analysis for PGW this year, because I know not enough has changed to allow the company to gain an overall pass. But I will update the quantitative statistics for 'other discussion purposes'.



Profit Normalisation table
FY2023
FY2022FY2021FY2020FY2019
Reference


Declared Profit$17.518m
$24.286m$22.720m$7.133m$4.510m


less (add) Fair Value Gains (Losses) net of Impairments0.72x($0.051m)
0.72x$2.182m0.72x($1.832m)0.72x$0.807m0.72x$3.187m
AR Note 5


less (add) Foreign Exchange Gains (Losses)0.72x$0.737m
0.72x($0.430m)0.72x$0.094m0.72x($0.178m)0.72x($0.8 12m)
AR Note 6


less (add) IFRS16 adjustment0.72x($0.613m)
0.72x($0.613m)0.72x($0.613m)0.72x($0.027m)
Post 5347



less (add) Non operating gains (losses)0.72x($0.327m)
0.72x($0.699m)0.72x($4.456m)0.72x($0.132m)0.72x$2. 170m
AR Note 4



equals Normalised Profit$17.335m
$24.603m$17.819m$7.471m$7.782m





Notes

1/ I don't believe there is sufficient disclosure in AR2022 or AR2023 to allow us to calculate an IFRS16 profit adjustment for FY2022. In the absence of this, I have rolled forward the IFRS16 adjustment for FY2021 into FY2022 and FY2023, assuming it to be the same.
2/ Earnings per share calculations (below) have been adjusted to take into account the 9th August 2019 10:1 share consolidation, reducing the number of shares on issue to 75.484 million.
3/ FY2019 figures are those referred to from AR2020 and some of those figures have been restated


Earnings Per Share Calculations

FY2019: $7.782m / 75.484m = 10.3c
FY2020: $7.471m / 75.484m = 9.9c
FY2021: $17.819m / 75.484m = 23.6c
FY2022: $24.603m / 75.484m = 32.6c
FY2023: $17.335m / 75.484m = 23.0c

The extraordinary drop in profits between FY2018 and FY2019 had me diving back to my FY2019 annual report to see what went wrong.

From AR2019 p5.
"Reflecting on FY2019, we believe it was one of the most operationally challenging of recent years. Farmer confidence in parts of the agriculture sector remains subdued, constraining farm spending and therefore our revenue for the year. This has also been evident in recent months with a discernible tightening of the credit environment"

From AR2019 p6:
"The impact of mycoplasma bovis (present in NZ since mid-2017) was felt across the livestock and rural supplies business. Most particularly with reduced dairy herd settlements, a reduction in tallies, a softening in demand for dairy beef and and a more cautious approach to spending in the dairy sector across a range of farm inputs."
"Market conditions continued to challenge both our Real Estate and Wool businesses with results down on last year."

That all seems like a reasonable 'excuse'. But I guess it reflects the view that when the dairy industry catches a cold, it is hard for the rest of the farmers in NZ in other sectors to make up the lost income. Tougher market conditions for meat and milk especially have once more emerged over 2023, disrupting any overall upwards earnings trend once again.

Conclusion: Fail Test

SNOOPY

[mike2020]

Most dairy farmer's I know are not feeling flush. Goat farmer's are worse off. I hear talk of reduced production
cutting back to 60% of allocated share. Red meats off the boil. The realestate side must be struggling. Retail I hear is quiet. All adds up. Add in a change in dividend policy. I feel your currently in uncharted territory.
My thoughts on div. If any it wont be inspirational. At least for the next 12 months.

[kiora]

Most dairy farmer's I know are not feeling flush. Goat farmer's are worse off. I hear talk of reduced production
cutting back to 60% of allocated share. Red meats off the boil. The realestate side must be struggling. Retail I hear is quiet. All adds up. Add in a change in dividend policy. I feel your currently in uncharted territory.
My thoughts on div. If any it wont be inspirational. At least for the next 12 months.

Dito dito with that
Splat.........

[mike2020]

It could be vulnerable to a take over though. Which would be a shame. It's going to return to glory eventually.

[Toddy]

Ditto with kiwifruit growers. Zespri is also being conservative with the issue of new license. Meaning less new developments.

[nztx]

https://www.nzshareholders.co.nz/scrip-article/with-shareholders-like-this-who-needs-enemies/

With shareholders like this, who needs enemies?


Interesting Article

[percy]

Ditto with kiwifruit growers. Zespri is also being conservative with the issue of new license. Meaning less new developments.

I was at the agm of PGC who at the time owned Pyne Gould Guinness.
The then chairman,Sir Miles Warren said they were not happy with their 5% return on their PGG shareholding,however he was well aware PGG customers would have been over the moon with that sort of return.
When PGW customers do well,PGW does well.
When their customers struggle,PGW struggles.
If Alan Lai thinks he can get greater profits from servicing the rural sector,when it is struggling he will kill PGW.Luckily he has the most to lose.

[iceman]

https://www.nzshareholders.co.nz/scrip-article/with-shareholders-like-this-who-needs-enemies/

With shareholders like this, who needs enemies?


Interesting Article

Oliver & Team are doing a good job on this. Alan Lai will destroy this great company the way he’s pushing ahead for his own benefit alone.

Look no further than Agiainvestor’s posts on this thread to see what he did to Agria’s minority investors in HK

[nztx]

Oliver & Team are doing a good job on this. Alan Lai will destroy this great company the way he’s pushing ahead for his own benefit alone.

Look no further than Agiainvestor’s posts on this thread to see what he did to Agria’s minority investors in HK


It looks like Lai & Agria should have been excised & forced to be ejected from the PGG Register long ago, alas where the Authorities hiding on this when they had very good grounds for it & likely the Authorities should have known what would eventuate if they failed to act ?

This is no tin shed trinket selling outfit, but one of the major national farming & rural supply companies - what were the Authorities thinking or dreaming about ? - this is of national significance and we can't have actors with a very questionable track record playing games with it - whose underlying motives may or may not be to plunder it ;)

[Davexl]

I was at the agm of PGC who at the time owned Pyne Gould Guinness.
The then chairman,Sir Miles Warren said they were not happy with their 5% return on their PGG shareholding,however he was well aware PGG customers would have been over the moon with that sort of return.
When PGW customers do well,PGW does well.
When their customers struggle,PGW struggles.
If Alan Lai thinks he can get greater profits from servicing the rural sector,when it is struggling he will kill PGW.Luckily he has the most to lose.

He ALSO has the 'most to gain', by asset stripping PGW from increased dividends (well past earnings per share) by using the additional debt headroom freed up recently...

[winner69]

I was at the agm of PGC who at the time owned Pyne Gould Guinness.
The then chairman,Sir Miles Warren said they were not happy with their 5% return on their PGG shareholding,however he was well aware PGG customers would have been over the moon with that sort of return.
When PGW customers do well,PGW does well.
When their customers struggle,PGW struggles.
If Alan Lai thinks he can get greater profits from servicing the rural sector,when it is struggling he will kill PGW.Luckily he has the most to lose.

On that note percy this is not a good headline

Sheep farmers face cash losses not seen since the 1980s

https://www.newshub.co.nz/home/shows.html

[Snoopy]

ROE here is defined as: (Adjusted or Normalised NPAT) / (End of Year Shareholder Equity)

FY2018: $14.881m / ($123.7m + ($292m-$234m)) = 8.19%
FY2019: $7.782m / ($398.264m-$234.000m) = 4.74%
FY2020: $7.471m / $156.702m = 4.77%
FY2021: $17.819m / $173.538m = 10.3%
FY2022: $24.603m / $172.684m = 14.2%

Notes

1/ A retrospective balance sheet for FY2018, assuming the Seed Business was already sold at the 30-06-2018 balance date, was prepared in the Korda Mentha October 2018 report (p36, p49). This provided a view of what a stand alone balance sheet for the PGW rural servicing business would look like. This was based on a projected capital return, following the purchase of the seed business by DLF Seeds A/S of Denmark, estimated at $292m. In fact the capital return would end up being only $234m. The difference between these two capital return numbers - equalling capital not paid out - I have added to shareholders equity as at 30-06-2018 for the purpose of calculating return on the total equity for FY2018.

2/ The $234m capital return eventually took place in FY2020, on 09/08/2019, following the settlement of the 'seed deal' on 01/05/2019. These two dates straddle the PGW end of year reporting date of 30-06-2019. A capital return was well signalled. So I believe it would be most representative to remove the capital return from the shareholder equity held on the books at the 30-06-2018 balance date for the purposes of making a 'Return on Equity' calculation.

An interesting observation to note is how far the return on equity figure has fallen in 2018, as the transition to the 'new PGW' was made in divesting the seeds business. The seeds business was where most of the intellectual property of PGW was held. And successfully exploiting intellectual property will generally yield a higher commercial return on assets than selling commodities. Given this, it is no surprise that the ROE over 2018 has dropped with the removal of the seed division. But it is quite sobering to see ROE almost cut in half!

None of the above makes a difference to the 'Buffett ROE picture', as ROE is consistently below the 15% goal for all years under consideration. But given the sharp improvement in the fortunes of the PGW rural servicing business over the last couple of years, I do wonder how high the ROE would have risen if the seeds business had not been sold.

Conclusion: Fail Test



ROE here is defined as: (Adjusted or Normalised NPAT) / (End of Year Shareholder Equity)

FY2019: $7.782m / ($398.264m-$234.000m) = 4.74%
FY2020: $7.471m / $156.702m = 4.77%
FY2021: $17.819m / $173.538m = 10.3%
FY2022: $24.603m / $172.684m = 14.2%
FY2023: $17.335m/ $169.261m = 10.2%

Notes

1/ The $234m capital return to shareholders from the seed division sale eventually took place in FY2020, on 09/08/2019, following the settlement of the 'seed deal' on 01/05/2019. These two dates straddle the PGW end of year reporting date of 30-06-2019 (FY2019). A capital return was well signalled. So I believe it would be most representative to remove the capital return from the shareholder equity held on the books at the 30-06-2018 balance date (and hence also the 30-06-2019 balance date) for the purposes of making a 'Return on Equity' calculation.

ROE is consistently below the 15% goal for all years under consideration.

Conclusion: Fail Test

SNOOPY

[Snoopy]

This test does not mean that PGW will always be able to raise margins above the rate of inflation. But it does mean that under certain market conditions it can, thus avoiding an eventual commodity price spiral to the bottom. The revenue associated with the now closed down Standardbred division has been removed from the appropriate year (FY2018).

Margin here is defined as: (Adjusted NPAT)/(Sales)

FY2018: $14.881m / ($808.695m - $10.421m) = 1.86%
FY2019: $7.782m / $798.834m = 0.974%
FY2020: $7.471m / $788.036m = 0.948%
FY2021: $17.819m / $847.815m = 2.10%
FY2022: $24.603m / $953.700m = 2.58%

Notes

1/ AR2020 p35 states "The 2019 comparatives have been restated to represent the 'Standardbred' business as a discontinued operation. Now we know that in AR2019 overall revenue was listed as $809.965m. The restated comparative figure for FY2019 was $798.834m. So I am making the assumption that the comparative difference:

$809.965m - $798.834m = $10.431m

represents the turnover of the now closed 'Standardbed' operation over FY2019. The turnover for 'Standardbred' over FY2018 has not been revealed. But as a best guess I am assuming it was the same as over FY2019.

------------------------

Three years of improving margins from FY2020 to FY2022 inclusive shows that sustained margin improvement is possible.

Conclusion: Pass Test



This test does not mean that PGW will always be able to raise margins above the rate of inflation. But it does mean that under certain market conditions it can, thus avoiding an eventual commodity price spiral to the bottom. FY2021 net profit margin of 2.10% and adjusted that by 7%: 2.10% x 1.07 = 2.25%? Actual net profit margin for FY2022 was 2.58%.

Margin here is defined as: (Adjusted NPAT)/(Sales)

FY2019: $7.782m / $798.834m = 0.974%
FY2020: $7.471m / $788.036m = 0.948%
FY2021: $17.819m / $847.815m = 2.10%
FY2022: $24.603m / $953.700m = 2.58%
FY2023: $17.335m / $975.692m = 1.78%


Notes

1/ AR2020 p35 states "The 2019 comparatives have been restated to represent the 'Standardbred' business as a discontinued operation. Now we know that in AR2019 overall revenue was listed as $809.965m. The restated comparative figure for FY2019 was $798.834m. So I am making the assumption that the comparative difference:

$809.965m - $798.834m = $10.431m

represents the turnover of the now closed 'Standardbed' operation over FY2019. The turnover for 'Standardbred' over FY2018 has not been revealed. But as a best guess I am assuming it was the same as over FY2019.

------------------------

If we assume inflation was 7% over FY2022, then:
a/ The revenue growth we might expect between FY2021 and FY2022 would be from $847.815m to 1.07 x $847.815m = $907.162m (a difference of $59.347m). The actual revenue growth was greater than this ($953.007m-$907.162m=$45.845m), which means revenue has grown faster than inflation.
b/ If profits has grown to match inflation, the profits would have grown to: $17.819m x 1.07 = $19.066m (a difference of $1.247m). The actual profit growth was greater than this ($24.603m-$19.066m=$5.537m) which means profits have grown faster than inflation.

We can remove the targetted effect of inflation from the net profit margin from the FY2022 calculation as follows:
($24.603m-$1.247m) / ($953.700m-$59.347m) = 2.61%

This means that taking inflation of 7% into account over that high inflation year of FY2022, the increase in profit margins was a little better than the raw figures unadjusted for inflation would suggest. Three years of improving margins from FY2020 to FY2022 inclusive shows that sustained NPAT margin improvement is possible, even though we took a step backwards over FY2023..

Edit: An alternative way to see if net profit margin has increased at a rate faster than inflation (refer post 5595)
FY2021 net profit margin of 2.10% and adjusted that by 7%: 2.10% x 1.07 = 2.25%? Actual net profit margin for FY2022 was 2.58%.


Conclusion: Pass Test

SNOOPY

[winner69]

Hey Snoops.....did you want a Pass Test score?

Logic makes some sense to draw that conclusion but isn't it about margin rather than $s ...on that surely a Fail

FY23 not very good …..FY22 revenues $975.692m grow at inflation of 6% would have given $1,034.234m revenues in F23 at FY22 margin of 2.58% would have generated $26.683m …at $17.335m they a bit short eh …inflation really hurt?

[nztx]

He ALSO has the 'most to gain', by asset stripping PGW from increased dividends (well past earnings per share) by using the additional debt headroom freed up recently...


Any more divisions surplus to requirements that can be lopped off similar to the Seeds division and hocked off
perhaps to awaiting Aussies or others waiting in the wings (that's not Singaporean Chop Sui either) ? ;)

Got to be another Wing, and a couple of legs tucked up in there somewhere ..

Progressive partial amputation program folks - Singaporean style - just so long as there is some movement after the Separation is carried out - don't worry if it hobbles or wobbles a bit afterwards ;)


If things Rural get real tough economically - how will PGW's financing & borrowing abilities fare ?

Lenders probably look for some earnings cover & if the wheels & dials are headed south in heavy head winds, that might not help one little bit..

An extended drought or some other event might be all it takes. Let's face it on 14 March 2024, Govt has declared Drought event already for Marlborough, Tasman & Nelson districts

How likely would it be that Aria come up with a pile of Ca$h to toss in if PGG got into a really tight spot and put the hand out to stakeholders to sure things up ? - or are they circling with an empty feed bowl looking for a fill up, or fail that a quick flick off to the next suitor ready to stump up any sort of pile depending on the day for their interest ?

On a 45% interest it doesn't look like nearly enough to see Aria operate the press and forceably spit out coins from one of NZ's iconic Rural Service Companies maybe being eyed up for a gutting by Singaporean interests .. and then the rest of the stakeholders may not like what they see going on and get rather upset :)

[Toddy]

These farm servicing companies also need to move with the times. With Starlink etc farmers are getting more access to the Internet.

It's a simple Google on the product manufactures name to see if they supply products direct.

I would say that 20 percent of the stuff I use to buy from Farmlands, PGG I now buy off the Internet and it gets dropped to my door at a significant discount.

It's just a matter of changing the way we purchase to be more in line with the modern world.

[blackcap]

I would say that 20 percent of the stuff I use to buy from Farmlands, PGG I now buy off the Internet and it gets dropped to my door at a significant discount.

.

I don't disagree, but is it the same product, brand and quality? Ie can I buy redband gumboots online cheaper than I can from PGG Wrightson?

[Toddy]

I'm talking about purchasing the exact same products.

When I started doing this, I though I had been a lazy idiot for not doing it sooner.

Also, alot of the manufactures offer you the same payment terms. Once you have bought off them once, then the next time they just invoice you.

As the older generation farmer retires then the next generation are all over the new way of doing business.

All as I'm saying is that over time the margins that Farmlands and PGg have enjoyed in the past may not be acceptable in the future on their retail side of the business.

[Snoopy]

Hey Snoops.....did you want a Pass Test score?

Logic makes some sense to draw that conclusion but isn't it about margin rather than $s ...on that surely a Fail

A few words on the Buffett Test Number 4. As a shareholder, we don't want to be part of a company that sells more and more stuff at less and less of a profit margin over the years. The logical extension of such a strategy is that the company ends up selling heaps and heaps of stuff but makes no net profit at all. That is obviously unsustainable. Retailers in particular, even the sellers of non-discretionary goods like PGW, do go through up and down cycles. So although it would be nice to see our 'ideal retailer' increase their net profit margin every year, this isn't going to happen, even for the best of retailers. Instead we look for the 'second best option'. Namely for those periods when 'times are good', our retailer should be able to demonstrate their ability to increase their net profit margin. Unless our company has that ability to increase profit margins at some time in the business cycle, then eventually all profits will disappear, and so will the retailer. I should add increasing profit margin does not equate to just raising prices. It also means sensible control of stock levels and the ability to increase stock turnover. Hopefully PGW's heavy IT spend over the last few years is helping with this. As is PGW's drive to up skill their sales staff with technical knowledge that they can share with farmers to help them make better purchasing decisions.

Up until Putin upset the trade routes -and oil and other commodity prices-, we have enjoyed 1%-3% annual inflation for as long as most investors today can remember. Even I got sucked in, as I reduced my 'acceptable yield on investment' goals, assuming that inflation was beaten. These last couple of years have come as a real shock, as I have had to consider what 'lifting your profit margin above the rate of inflation' really means. Your comment 'did you want a Pass Test score', suggests to me that perhaps you think I am deliberately or unconsciously looking for the 'sunny side of my statistics' so that I can contrive them to give me the test result I want. My method was to adjust the 'ingredients' for inflation and check what happened to the margin after that. Perhaps instead I should have taken the FY2021 net profit margin of 2.10% and adjusted that by 7%: 2.10% x 1.07 = 2.25%? Actual net profit margin for FY2022 was 2.58%. So I did increase my net profit margin by greater that the rate of inflation over the year. Is that what you are getting at?

No-one is disputing that the margin has gone down in FY2023. But I don't see that as a 'fail'. Rather it is part of a normal retail cyclical downturn which, when market conditions turn, PGW should have the ability (judging by their track record) to 'turn that margin around' like they did over the years FY2020 to FY2022. It is the ability to turn things around that is the point of this test. This is why PGW earns a 'pass' mark for the BT4/ test in my view. But passing the BT4/ test is not enough for Buffett. He would require PGW to pass all four of his tests for PGW to qualify as a 'Buffett style' investment.

SNOOPY

[winner69]

Thanks Snoopy for that

Good PGW consistently are profitable even if their profit margin is razor thin …..often thinner than what WHS achieve.

[kiora]

I wonder if/when H & G will step in again ?

[Snoopy]

Not much new Snoops. Has this statement from Agria ….rest is about what our Oliver says

Extract

In a statement supplied to the Herald, Agria took aim at PGW’s performance.

“While there are some small signs of performance improvement in one or two business lines, the last four years has seen inconsistent and declining business performance,” the company said.

“As a result, shareholders including Agria are seeing the ongoing erosion of value – market capitalisation, share price, dividends, international sales and demand, margins, and increasing debt levels.”

Agria acknowledged the work of the board to lead and govern “through these challenging years” but said the company now required a different skill set to improve its business performance.

“Regrettably, the business metrics and facts speak for themselves and in the best interests of the company, Agria believes an updated and new set of skills is required to arrest the four-year financial decline of PGG Wrightson.”


Alan Lai would have direct contact with Agria appointed directors on the board. So I imagine he has better and more frequent intelligence information coming his way than a pleb shareholder like me. That would include information on business units which for PGW reporting purposes are 'lumped together' under the broad groupings of "Agency" and "Retail & Water". Nevertheless I think it is worth looking at my 'net profit trend table' in light of Mr Lai's press statement.



Profit Normalisation table
FY2023
FY2022FY2021FY2020FY2019
Reference


Declared Profit$17.518m
$24.286m$22.720m$7.133m$4.510m


less (add) Fair Value Gains (Losses) net of Impairments0.72x($0.051m)
0.72x$2.182m0.72x($1.832m)0.72x$0.807m0.72x$3.187m
AR Note 5


less (add) Foreign Exchange Gains (Losses)0.72x$0.737m
0.72x($0.430m)0.72x$0.094m0.72x($0.178m)0.72x($0.8 12m)
AR Note 6


less (add) IFRS16 adjustment0.72x($0.613m)
0.72x($0.613m)0.72x($0.613m)0.72x($0.027m)
Post 5347


less (add) Non operating gains (losses)0.72x($0.327m)
0.72x($0.699m)0.72x($4.456m)0.72x($0.132m)0.72x$2. 170m
AR Note 4


equals Normalised Profit$17.335m
$24.603m$17.819m$7.471m$7.782m



Inconsistent' means varying fortunes from year to year. If you expect a steady profit from year to year then that statement is true. Farm profits certainly do go up and down and so do profits at PGW. If profits are inconsistent and going up then this is a good thing. If profits are inconsistent and going down, then this is not so good. But if consistency as a measure aligns with the fortunes of our farmers, then I would say the profits at PGW are very consistent.

Is the business in decline? Over the last reported year -FY2023- definitely yes. And this decline has continued into FY2024. But IMO this to be more related to the general agricultural market malaise resulting from the cyclical nature of the industry, rather than anything specific to PGW. Indeed PGW claim to be gaining market share off their largest competitor, the Farmlands co-operative. Unlike Farmlands, PGW did make a positive net profit after tax over FY2023, even if it was down on the prior year.

Of the two new director skill set nominations, Vena Cawley the former chief customer officer at Contact Energy, is likely a very customer focussed guy. So is Alan Lai suggesting that PGW are still not customer focussed enough? Traci Houpapa, Chair of Landcorp, is effectively chairman of the largest corporate farm in the country. So maybe Mr Lai is indirectly suggesting that more input from a 'customer perspective' is desirable at board level. Maybe he is right? Those NZ lawyers and MBA types on the board now are out of touch?

'Market capitalisation', 'share price', and 'dividends' are all directly linked in a company like PGW.

As for 'international sales', I seem to recall there was mention of PGW of 'Agritrade', the wholesale business arm, shipping some product off to China. That potential area of expansion seems to have gone very quiet in recent years. Is Mr Lai signalling that management have become too 'inward looking'?

Margins have characteristically always been low in industry supply companies, except when you have a unique product that can plug into a real need (I am thinking Skellerup and how that company has grown). But PGW is a retailer rather than a product innovator. And personally I consider PGW's margin performance satisfactory (refer post 5589).

Debt levels can be reduced going forwards by cancelling the dividend. But somehow, I don't think that this was the kind of 'debt level fix' that Mr Lai had in mind! The current board fracas would indicate there may be disagreement as to what debt levels for the company are appropriate. However, I haven't heard about any substantial new initiatives that would require new capital to fund. 'Running a bit leaner' might incentivise the management team to look for efficiencies

SNOOPY

[Toddy]

Farmers are getting smarter. The old school cyclical spending habit is becoming less correlated by the day.

Education plus technology means that farmers are managing their cashflows and particularly their expenditure with much more efficiency.

[Toddy]

When I walk into PGW stores I just see old school workers and no new age young people wanting to sell you the latest technology.

It's a very reactive business model.

Yet, we rely on having these stores in the local farming communities for the basics.

I would love to see a massive shake up.

I haven't looked into the American or European farm suppliers to see how advanced they are.

Next rainy day I will Google the heck out of it.

[Sideshow Bob]

Farmers are getting smarter. The old school cyclical spending habit is becoming less correlated by the day.

Education plus technology means that farmers are managing their cashflows and particularly their expenditure with much more efficiency.

Page 27 - https://www.pggwrightson.co.nz/sites/default/files/2023-09/PGW%20Annual%20Report%202023_0.pdf ()pages 50/51 of their annual report)

Under 30 is their biggest number of new employees - also the biggest number of employees who leave. Over 50's the lowest of the leavers - probably the "lifers".

Also hiring way more women than men.

[Toddy]

I don't know what the answer is. But I would want to become the number one provider of technology to farmers and be know as the farming solution provider.

It's a easy conversation with the old farmers. The amount I have got onto Starlink and changed their world is amazing.

Conversation goes. Dump your expensive non tax deductible sky subscription. Get tax deductible Starlink. Then get Sky Now for a third of the price. That pays for your Starlink right there.
And since you have a super powered Internet, get off the shelf wireless security system, wireless water monitoring station, wireless everything.

PGW should be selling all this stuff. The young employees would love talking about it.

Good for share trading too if you are that way inclined.

[Snoopy]

Amongst this deteriorating financial outlook, you would have expected PGW's banking syndicate to be getting a bit cautious. Maybe they might 'sink the lid' on the amount of capital that PGW can borrow gradually over time, to ensure a disciplined pay back of debt? But no, the opposite has happened. From HYR2024 p26
"On 22nd December 2023 the syndicated bank facility agreement was amended and restated with an effective date of 19 January 2024."
-Term debt facilities are now permitted to grow to $100m (+$10m), with this facility maturing on 27 February 2026. (Amount drawn on this facility @31-12-2023 was $45.19m).
-Working capital facilities are now permitted to grow to $85m (+$15m), with this facility maturing on 27 February 2026. (Amount drawn on this facility @31-12-2023 was $65m).

To put this new 'revised PGW credit limit' into context, the total dividend payout over FY2023 was $21.712m. So it looks like there is plenty of headroom ($55m in long term debt facilities) for a 'new board' -should they be elected- to 'borrow to pay a dividend' - should they so choose, even if the company makes zero NPAT this year. Interesting!


I want to raise an 'alternative interpretation' on why the debt balance at PGW has seemingly been given the green light to 'blow out'.

From HYR24 page 26, just after the new higher debt burden tolerance has been documented.
"Under the amended and restated agreement, the Company continues to grant a general security deed and mortgage over all its wholly-owned New Zealand assets to a security trust. Bank of New Zealand acts as facility agent and security trustee for the banking syndicate, which comprises Bank of New Zealand, Co-operative Rabobank U.A. (New Zealand branch) and Westpac New Zealand Limited. The amended and restated agreement contains various financial covenants and restrictions that are standard for facilities of this nature, including maximum permissible ratios for debt leverage and operating leverage, together with limits for Go receivables, capital expenditure and asset disposals from its effective date."

The company has not given shareholders any indications of specifically what these 'covenants and restrictions' are. But way back in 2009, when Alan Lai and Agria were first invited to take a stake in PGW, they certainly did. Fortunately I kept that prospectus in my archive, even though it has long since vanished from the internet. If these covenants are unchanged from those days, and because PGW was in a similarly difficult phase of the agricultural cycle then as they are today - I think this is likely -, then there are currently restrictions on PGW from their banking syndicate as follows (refer to page 44 of the 2009 capital raising document):

Debt Leverage



Senior Debt Coverage RatioPercentage of Excess cashflows available for distributionPGW Actual Value 31-12-2023


SDRC > 3.00x0%


3.00x > SDRC > 2.00x50%2.62


SDRC < 2.00x100%



Note: 'Senior Debt Coverage Ratio' = Senior Debt / EBITDA(pre IFRS16)




Operating Leverage



Fixed Cost Coverage Ratio
Percentage of Excess cashflows available for distribution
PGW Actual Value 31-12-2023


FCCR > 2.00xNo restrictions


FCCR < 2.00x
Time plan to restore metric to > 2.00x
1.56



Note: FCCR = EBITDA(post IFRS16) / (Total Net Interest Paid + Lease Expenses)

I wouldn't mind betting that PGW have been told (note that word, as it is the banking syndicate that is doing the telling) to improve their FCCR back to above 2 by the end of the financial year. Their dividend paying ability will then be determined by where the SDRC sits. The banks know that PGW will be having a tough time this year, and they don't want to be embarrassed by PGW busting the previously agreed borrowing limits. So they have given PGW some 'extra rope' so that if trading conditions really get smashed in the second half, and PGW ends up making EBITDA well below the latest forecast $50m for the whole year, then the debt covenants don't get busted. That means the increased debt covenants are not there because of the incredible resilient earning capacity of PGW. They are there to avoid embarrassing the banking syndicate, should PGW trading turn out to be rather worse than anticipated.

SNOOPY

[Sideshow Bob]

A major U-turn?? SP to rocket today....??


https://www.nzx.com/announcements/428401

PGG Wrightson Limited (PGW) advises that it has received notice from Agria (Singapore) Pte Ltd (Agria) that it has withdrawn its notice issued on 8 February 2024 requesting that a special shareholders meeting be convened to consider several proposed director changes.
The PGW Board welcomes this development and has determined that preparations for the proposed special meeting will now not be needed.
Agria and the PGW Board have determined that the current composition and the majority of the membership of the Board continue to have an appropriate balance of expertise, skills, and independence.

[percy]

Appears to me the excellent work put in by Oliver Mander of NZSA,has had another good result.

[Balance]

Appears to me the excellent work put in by Oliver Mander of NZSA,has had another good result.

Very good indeed. Well done to Oliver and all involved.

[blackcap]

Appears to me the excellent work put in by Oliver Mander of NZSA,has had another good result.

I third that. Saw Oliver on Wednesday in Wellington and shook his hand. The NZSA has done some fantastic work the last few years obtaining tangible results that can only be for the betterment of governance in NZ.

[iceman]

Appears to me the excellent work put in by Oliver Mander of NZSA,has had another good result.

Agreed. Well done Oliver & NZSA

[Snoopy]

Appears to me the excellent work put in by Oliver Mander of NZSA,has had another good result.


Well yes, except that now we shareholders don't get to vote on Oliver's excellent proposal that only minority shareholders should vote on their minority shareholder board representation. Oh well, I guess it means that Agria are now communicating with the board at the board level again, without having a public spat. Maybe Mr Lai read my analysis on this forum and realised that operationally, things were not as bad as he first thought ;-). I wonder if Elders had something to say behind the scenes?

I do realise that directors are concerned with the operation of the company of which they are a director. But with Agria as a 44% shareholder, this was a hint to me that perhaps the PGW directors should have stepped outside of their immediate mandate and considered the effect of their 'shock dividend cancellation' on their largest shareholder. There is nothing for the company to do now but 'hunker down' as they prepare for coming out the other side - eventually. There is no sense in punishing PGW staff by sacking them because it is not raining.

SNOOPY

[Oliver Mander]

Thanks for the kind words everyone. To Snoopy's point, we'll keep advocating for a minority interests regime more generally. We will also keep a watching eye on PGW and any next steps that may be required.

[nztx]

Time for the 44% foreign Shareholder to start selling down their holding & exit the scene ?

Let's face it - everyone is now awake to them & the past / recent history - so all are ready for the next time
that they try something :)

Probably also not gone unnoticed in High places either this time, after the last episodes


Well done Oliver

[Snoopy]

I bought the rest of my incremental holding at $2.30 a couple of days ago. That represents a 30% discount on the 9.0% gross yield I was after across the business cycle. I am very happy with that. As it turns out, if I had waited until today, then I could have bought some of those shares 20c cheaper. But I am not worried about picking bottoms. I am more concerned about FOMO. I reckon this share could rise to $3 again from here in the short term as fast as the price collapsed - in just one day. I would have been really annoyed with myself if I had left such a PGW share purchase discount on the table (see post 5540) without acting.


A couple of weeks ago, I was pretty convinced we would have a new director line up as a result of an imminent 'Special General Meeting', plus a reinstated dividend. I sure got that one wrong!

Some might say my recent FOMO share purchasing was a result of a 'Foolish Overzealous Maniacal Obsession'. Don't feel too sorry for me though. I did the calculations and found out that after my FOMO purchase, my average price paid per share is now $1.89. So my 'averaging up' (note 'not averaging down') has not exactly left me on poor street with this one. And while that $1.89 does include the proceeds of the seed division sale returned to shareholders, it does not include all of those juicy dividends received over 'most' years. Which just goes to show if you hang around long enough (I have been a PGG Wrightson shareholder 'since the beginning' and was a Wrightson shareholder before that, where I got my 'first taste' in 1995), it is quite difficult to lose money in the sharemarket, by investing in shares that generally make a profit at least! So what do I do from here?

The first thing investors need to keep in mind about farmers is that 'farmers never have a good year'. By that, I mean farmers don't trumpet from the hay barn that they are doing well. They just stoically get along with things and maybe buy some paddocks off the neighbour. However if farmers have a bad year, this soon becomes national news. Townies who know little about farming get all jittery and 'sell out'. These townies would be better off watching 'Country Calendar' than the ticker on their rural sharemarket investments. Then they would then see how switched on our farmers really are. What I am saying here is that there will be no bell rung at the rural market (share) bottom. So at some point you 'have to be in to win'. The PGW share price chart may look at bit like Synlait's over the last year. But this is no Synlait, I am very sure of that.

The handicap for me is that I have set myself an 'extra investment rule' that most of you fellow investors do not have. That rule being I am not allowed to purchase two parcels of shares in the same company twice in a row. Fortunately I managed to buy some SCT shares last week. So I am now free to purchase some more PGW shares if I wish to do so. But should I do so? I think yes, although with possibly no dividend until CY2025 now, that 'FOMO urgency' has gone. The share is still trading at around a 30% discount to my 'Capitalised Dividend Valuation' model where I bet on a 9% business cycle gross yield. This is enough of a discount to make me lose interest in all of those listed property entities I have been investigating getting into over the last twelve months. It is hard to rationalise why PGW shares should be worth $1 less than they were barely a month ago when Alan Lai dropped his special meeting bombshell (since withdrawn). We have since then had more parts of the country declared as 'drought sufferers' - could that be a reason? And Nelson/Marlborough are having a tough time. Just as well there is a superior vintage grape harvest happening at those wineries in Blenheim that we don't hear about, which farmers might just be able to drown their sorrows with. Who knows, PGW might even benefit from that ;-)

SNOOPY

.....who may even sample some of the cask wine that is normally used for 'other purposes' tomorrow, while I decide what to do.

[Sideshow Bob]

https://www.nzx.com/announcements/428613

Clarification of Business Desk Article

Garry Moore, Chair of PGG Wrightson Limited (PGW) wishes to clarify a quote discussed in the Business Desk article released today under the heading “Meng Foon won't quit as a PGG Wrightson director.”

The article notes that Mr Moore had commented that the New Zealand Shareholders Association had identified Meng Foon as an Agria representative rather than an independent director and that “We agree with them”, implying that this reflected a determination of the PGW Board.

Mr Moore wished to clarify that while this comment reflected his view and the views of some other directors, the independence determination had not been formally reconsidered by the PGW Board recently. This matter would however be reconsidered by the PGW Board in the near future and if there was any change in the current determination that Meng Foon was an Independent Director, this would be announced to the market.

[Snoopy]

Clarification of Business Desk Article

Garry Moore, Chair of PGG Wrightson Limited (PGW) wishes to clarify a quote discussed in the Business Desk article released today under the heading “Meng Foon won't quit as a PGG Wrightson director.”

The article notes that Mr Moore had commented that the New Zealand Shareholders Association had identified Meng Foon as an Agria representative rather than an independent director and that “We agree with them”, implying that this reflected a determination of the PGW Board.

Mr Moore wished to clarify that while this comment reflected his view and the views of some other directors, the independence determination had not been formally reconsidered by the PGW Board recently. This matter would however be reconsidered by the PGW Board in the near future and if there was any change in the current determination that Meng Foon was an Independent Director, this would be announced to the market.


Hmmm. Anyone else see the irony in an 'independent' director being asked to resign, because he won't vote the way other 'independent' directors tell him to?

SNOOPY

[iceman]

Hmmm. Anyone else see the irony in an 'independent' director being asked to resign, because he won't vote the way other 'independent' directors tell him to?

SNOOPY

Shouldn't the question be why was this former and failed "Race Relations Commissioner" voted to the Board in the first place ? What skill did he bring to it ?

[Snoopy]

Shouldn't the question be why was this former and failed "Race Relations Commissioner" voted to the Board in the first place ? What skill did he bring to it ?


I accept that Meng Foon left the "Race Relations Commissioner" under unfortunate circumstances. But these were related to disclosures of his business interests and not related to his day to day work as 'RRC'. As for what skills he brought to the job, Meng Foon served as the mayor of Gisborne for 18 years. That is a fair bit of governance experience to bring to the table. Also his parents ran an orchard and a vegetable shop where a young Meng Foon worked after school and in the holidays which add some 'grass root' credentials to his CV. And Hawkes Bay, even disregarding recent cyclone events, has had some challenging weather for the local farming interests to deal with. So I would say a Meng Foon has more than his fair share of relevant complementary credentials to bring to the PGW board table. As a PGW shareholder, I voted for him and would not hesitate to do so again.

SNOOPY

[iceman]

I accept that Meng Foon left the "Race Relations Commissioner" under unfortunate circumstances. But these were related to disclosures of his business interests and not related to his day to day work as 'RRC'. As for what skills he brought to the job, Meng Foon served as the mayor of Gisborne for 18 years. That is a fair bit of governance experience to bring to the table. Also his parents ran an orchard and a vegetable shop where a young Meng Foon worked after school and in the holidays which add some 'grass root' credentials to his CV. And Hawkes Bay, even disregarding recent cyclone events, has had some challenging weather for the local farming interests to deal with. So I would say a Meng Foon has more than his fair share of relevant complementary credentials to bring to the PGW board table. As a PGW shareholder, I voted for him and would not hesitate to do so again.

SNOOPY

Fair enough. I did not vote for him as I didn't think he was a good option for an Independent Director on the PGW Board. I do note that the NZSA has identified him as an Agria representative. They do not do that without a good reason.

Discl: Sold out last year and currently not a holder

[winner69]

Foon’s bio on PGW website says he probably a good safe choice to get on the Board ……..and vote the way his sponsor wants him to

Extract -

Meng is knowledgeable about best practice organisational structures and operating systems, and he believes that data, science, and technology will help ensure future sustainability in environment and land business profitability.

He has worked with Māori landowners and believes that Māori land businesses are important contributors to the leadership of Aotearoa. He aha te mea nui o te ao – he Tangata, inclusive people and relationships are the success of all things he does.

[blackcap]

I am on the register and going to bring a resolution to have Meng Foon removed as an independent director. As someone on the board pointed out, he is not competent.

Foon is an imbecile and should never have been voted on the board in the first place.

[Snoopy]

I am on the register and going to bring a resolution to have Meng Foon removed as an independent director. As someone on the board pointed out, he is not competent.

Foon is an imbecile and should never have been voted on the board in the first place.


I had a brief word with Meng Foon at the last AGM. He seemed very measured and respectful as a new director ought to be and gave the impression he is taking his new role seriously, and was not keen to put his head above the parapet until he was fully up to speed with his duties. When you say 'not competent' Blackcap, do you mean he is not a trained lawyer or accountant?

SNOOPY

[blackcap]

I had a brief word with Meng Foon at the last AGM. He seemed very measured and respectful as a new director ought to be and gave the impression he is taking his new role seriously, and was not keen to put his head above the parapet until he was fully up to speed with his duties. When you say 'not competent' Blackcap, do you mean he is not a trained lawyer or accountant?

SNOOPY

No, I have no idea of his competence. I am only saying what I heard another board member say about him. But when he was race relations conciliator I thought he lacked judgement.

I question his independence and I do not want an Agria stooge on the board as an independent. (Pure supposition on my part) but independence is something minority shareholders should value. I fully support the NZSA on this issue.

[kiora]

Not good for PGG?
https://www.rnz.co.nz/news/business/512775/southland-businesses-hit-as-farmers-slow-spending?utm_source=ST&utm_medium=email&utm_campaign=ShareTrader+AM+Update+for+Thursday+28 +March+2024

[Snoopy]

Not good for PGG?
https://www.rnz.co.nz/news/business/512775/southland-businesses-hit-as-farmers-slow-spending?utm_source=ST&utm_medium=email&utm_campaign=ShareTrader+AM+Update+for+Thursday+28 +March+2024

From the article

------------------------------

McAra said companies providing essential maintenance like electrical work are doing okay but others were having to make tough decisions to survive.

"Farmers are having to make decisions on where to spend and where to defer, if they can put off things like upgrading buildings or even using fertiliser they are doing so."

------------------------------

No it isn't good news. But there are consumable products down on the farm that still have to bought and utilised. PGW deal with these products. PGW are not into selling new tractors or 'boats cars and discretionary spend'.

SNOOPY

[Toddy]

My farming friends are running their businesses as tightly as they can. And any cash left over is being invested on the stock markets in good and sometimes cheap companies.

From top down Farmers are getting smarter so if the ROI doesn't stack up on the farm then they spread their risk and invest in other areas of the economy.

I've never read any stats on this. It's definitely becoming more common. Hence, never assume that on farm expenditure will return to the good old days.
Climate change, increased regulation etc means that farmers need to spread their dollars across other less risky sectors.

[Snoopy]

My farming friends are running their businesses as tightly as they can. And any cash left over is being invested on the stock markets in good and sometimes cheap companies.

From top down Farmers are getting smarter so if the ROI doesn't stack up on the farm then they spread their risk and invest in other areas of the economy.

I've never read any stats on this. It's definitely becoming more common. Hence, never assume that on farm expenditure will return to the good old days.
Climate change, increased regulation etc means that farmers need to spread their dollars across other less risky sectors.


Interesting perspective. I have cousins who are farmers. But I have often reflected that if I was farmer myself, I would not invest in PGW. That isn't because 'deep down' I don't believe in the company. I definitely do think that PGW do a good job in supporting and supplying our farming community. But, using exactly the same logic as Toddy, if I was a farmer with a bit of spare capital, I would likely invest in some complimentary industry that would supply some cashflow to my farm when farming times were tough. But that is all hypothetical as I probably would not work hard enough if I were a real farmer anyway. It is much easier being a 'pseudo keyboard desk farmer' tending my modest vegetable patch.

What is heartening from your comments Toddy, is that you and your farming friends have 'cash left over'. In a real farming downturn you would not have that. So I see the current farming downturn more as a return to a 'grumbling norm' rather than a portent of a mass walk off their land by the rural debt stricken.

SNOOPY

[Toddy]

Reasons to feel optimistic.

No longer an anti farming government.
8 percent European NZ tariffs come off 1 May.
Cost of debt will decrease as interest rates come down.
Pressure on the NZ dollar due to interest rates.
Cost of labour decreasing due to a flood of immigrants and return of back packers ( just signed picking contract that is cheaper than last year).
A good summer.
That's just to name a few.

There are always things out of your control when dealing with nature. But I will take that any day of the week compared to my 25 years of being a spreadsheet and coffee drinking expert doing accounting and banking sitting in a office chair.

[kiora]

NZ less reliant on cropping?
https://www.sharecafe.com.au/2024/04/08/elders-shares-slump-amid-climate-and-economic-challenges/

[Toddy]

NZ less reliant on cropping?
https://www.sharecafe.com.au/2024/04/08/elders-shares-slump-amid-climate-and-economic-challenges/

Pretty much just another day on the farm.
As I've said in the past, there are no stats differentiating between forced pull back on, on farm expenditure vs farmers just choosing to invest elsewhere to diversify.

[kiora]

"New Zealand Ag Needs Innovation To Stay Open For Business"
https://www.scoop.co.nz/stories/BU2404/S00188/new-zealand-ag-needs-innovation-to-stay-open-for-business.htm?utm_source=ST&utm_medium=email&utm_campaign=ShareTrader+AM+Update+for+Tuesday+16+ April+2024

[Snoopy]

"New Zealand Ag Needs Innovation To Stay Open For Business"
https://www.scoop.co.nz/stories/BU2404/S00188/new-zealand-ag-needs-innovation-to-stay-open-for-business.htm?utm_source=ST&utm_medium=email&utm_campaign=ShareTrader+AM+Update+for+Tuesday+16+ April+2024

I read the article by Liz Shackleton:
"Liz Shackleton is chief executive of Animal and Plant Health NZ, the industry association for companies which manufacture and distribute crop protection and animal health products."

and I thought. "What a whinger." Basically she wants all restrictions on the importation of overseas new chemicals for agricultural purposes to be 'fast tracked', which would obviously suit the business sector she represents very well.

"With new products taking up to five years to register, with a 100 day statutory target, and minor product changes taking more than year, with a 10 day target, New Zealand’s market is simply too small for delays of this magnitude, so they will invest and supply elsewhere."

These 'up to ' statistics are misleading. What product took five years to register? No doubt there was a very good reason for that! More to the point, what is the average time for approval?

"The EPA is allocating four times more resourcing to reassessing products than to introducing new, environmentally-friendly chemistry into New Zealand."

What is wrong with reassessing products as more data becomes available? I would expect nothing less from the EPA.

"The regulatory system is strained by inconsistent risk models, a labour-intensive processing system, and decisions inadequately considering the environmental benefits of newer chemistries. A balanced risk assessment considers proportionality as well as severity and probability".

It is not industy's job to determine risk models. Automation will not improve the processing of new applications. This is just horticultural suppliers bluster. Nothing more. Thank goodness the EPA is there to regulate these idiots.

SNOOPY

[Snoopy]

Some might say my recent FOMO share purchasing was a result of a 'Foolish Overzealous Maniacal Obsession'. Don't feel too sorry for me though. I did the calculations and found out that after my FOMO purchase, my average price paid per share is now $1.89. So my 'averaging up' (note 'not averaging down') has not exactly left me on poor street with this one. And while that $1.89 does include the proceeds of the seed division sale returned to shareholders, it does not include all of those juicy dividends received over 'most' years. Which just goes to show if you hang around long enough (I have been a PGG Wrightson shareholder 'since the beginning' and was a Wrightson shareholder before that, where I got my 'first taste' in 1995), it is quite difficult to lose money in the sharemarket, by investing in shares that generally make a profit at least! So what do I do from here?

There will be no bell rung at the rural market (share) bottom. So at some point you 'have to be in to win'. The PGW share price chart may look at bit like Synlait's over the last year. But this is no Synlait, I am very sure of that.

The handicap for me is that I have set myself an 'extra investment rule' that most of you fellow investors do not have. That rule being I am not allowed to purchase two parcels of shares in the same company twice in a row. Fortunately I managed to buy some SCT shares last week. So I am now free to purchase some more PGW shares if I wish to do so. But should I do so? I think yes, although with possibly no dividend until CY2025 now, that 'FOMO urgency' has gone. The share is still trading at around a 30% discount to my 'Capitalised Dividend Valuation' model where I bet on a 9% business cycle gross yield. This is enough of a discount to make me lose interest in all of those listed property entities I have been investigating getting into over the last twelve months. It is hard to rationalise why PGW shares should be worth $1 less than they were barely a month ago when Alan Lai dropped his special meeting bombshell (since withdrawn).


Looked at the market and did a double take when I saw the PGW share price under 2 bucks. What the.....? What I can say is that come the end of the day some nervous nellies will be sleeping better, while I will be on my way to being much richer. Yes I couldn't resist topping up today. My average acquisition price for my PGW shares is now $1.90. Creeping up. But when the market takes to attacking the PGW share price with a sledgehammer, there is nothing else to do but BUY BUY BUY!

Or as Split Enz might say to the sheep dog herding up those rogue shares: "What more can a poor doggie do?"

SNOOPY

[Davexl]

Wondering if Alan Lai, feeling aggrieved, is dumping some shares and driving the price down - been a stinker today...

[Snoopy]

Wondering if Alan Lai, feeling aggrieved, is dumping some shares and driving the price down - been a stinker today...


I guess anything is possible. But what would be the motive to do something like that? Maybe to really wound already hurting shareholders, driving the share price down even further, at which point Mr Lai comes in with a low ball full takeover offer? However there is a glaring flaw in such a plan. Elders hold a blocking stake. Why would Elders having gone to a lot of effort to acquire their blocking stake at a high price from the Chinese government only a little over a year ago, suddenly decide to sell out at a large loss?

There were 50,793 PGW shares traded today. Alan Lai, via Agria controls 33,483,399 PGW shares. If Mr Lai was serious about a sell down, I don't think he would do it 'on market' like this.

SNOOPY

[mike2020]

I have to be honest with you here. It is not a liquid stock a lot of the time, I wanted to sell 10,000 at one stage quite a while ago and the trade was held up at the broker end. Aside from a takeover move as a catalyst there is little hope of a return to divs in the medium term and I lowered my buy price several times and after the last update it is still below todays price.
I look at the real estate, retail and livestock as all in a trough with farmers making less and not spending or moving or probably even borrowing. Costs can only be up, those new Santa Fes are over 80k. Staff and compliance costs? It all equals costs up income down.
PGW has been one of my favorite listed companies over the years but this is a big down cycle. Long term you will be fine.

[Snoopy]

I have to be honest with you here. It is not a liquid stock a lot of the time, I wanted to sell 10,000 at one stage quite a while ago and the trade was held up at the broker end. Aside from a takeover move as a catalyst there is little hope of a return to divs in the medium term and I lowered my buy price several times and after the last update it is still below todays price.
I look at the real estate, retail and livestock as all in a trough with farmers making less and not spending or moving or probably even borrowing.


I hear you about the liquidity. PGW is not a traders share. I would crash the market if I sold my total PGW stake in a hurry. And as you found out mike2020, with PGW, it can take as few as 10,000 shares to do that! Psychologically I get around this 'lack of liquidity' by imagining holding my shares right through the business cycle and thinking about those juicy dividends I will be raking in at the top. PGW has never been my biggest NZX shareholding. But I think PGW still holds the record for the largest dividend cheque from an operational business period that I have ever received. There may be no dividend this calendar year. But my hybrid capitalised earnings and dividend valuation as of now:

https://www.sharetrader.co.nz/showthread.php?2923-PGW-PGG-Wrightson&p=1043694&viewfull=1#post1043694

is telling me this share is worth $3.13, as a 'mid-point' business cycle valuation, based on my required gross yield of 9%. Granted of the five years I was using for business cycle valuation purposes 2021, 2022 and 2023 were exceptionally good. But with shares trading at $1.92 on the market today, that is a 39% discount to my fair value mid business cycle price. For a stable company in a steady sized but cyclical market, my 'rule of thumb' is that 'the bottom' is 20% below my mid business cycle fair valuation. That equates to $2.50. But on the market at $1.92, we are 23% below even that! According to the stockpicking competition, PGW shares have slumped 43.53% just this year. This makes it the worst performing share of all, below even Synlait and Rua Biosciences. This to me is crazy. The receivers are not barking at the PGW gate. Blame the Alan Lai fracas?

I disagree about the dividend being AWOL as far as we can forecast. Alan Lai is an international businessman and he needs cashflow from PGW to keep his other business interests humming. We know that PGW has the capacity, and banking syndicate approval for some level of dividend to be paid. So I think it will happen in the first half of CY2025, once the new Alan Lai lead board is in place.

If farmers need to keep their animals and crops alive, then they will be spending at retail, even if they have to go into debt to do so. If they can't afford to keep their animals, then it is off to the livestock yards with them and PGW clips the ticket. Real Estate does seem to be a perpetual thorn in the side of the PGW empire. But I did hear on the rural news this morning that the price for rural land for the three months to the end of March has not dropped as expected. So at least that is not a negative. It helps to think of PGW Real Estate as part of the old 'One PGW' plan. That is, it opens up cross selling opportunities to new farm owners, even if the Real Estate division is not profitable within itself right now.

The only thing that is stopping me buying even more PGW shares today is my self imposed rule of not being allowed to buy a second order of the same share twice in a row. I have to buy into a different share next, before I am 'allowed' another bite at PGW.



Costs can only be up, those new Santa Fes are over 80k. Staff and compliance costs? It all equals costs up income down.
PGW has been one of my favorite listed companies over the years but this is a big down cycle. Long term you will be fine.


The cost cutting has started. Those expensive Santa Fes, are in the rear view mirror now, just like Christmas. Our local Ford dealer had a yard full of PGW branded Rangers a couple of months ago. PGW is keeping ahead of Farmlands. The new Farmlands Rangers are only making their way onto that same Ford yard now.

SNOOPY

[whatsup]

I hear you about the liquidity. PGW is not a traders share. I would crash the market if I sold my total PGW stake in a hurry. And as you found out mike2020, with PGW, it can take as few as 10,000 shares to do that! Psychologically I get around this 'lack of liquidity' by imagining holding my shares right through the business cycle and thinking about those juicy dividends I will be raking in at the top. PGW has never been my biggest NZX shareholding. But I think PGW still holds the record for the largest dividend cheque from an operational business period that I have ever received. There may be no dividend this calendar year. But my hybrid capitalised earnings and dividend valuation as of now:

https://www.sharetrader.co.nz/showthread.php?2923-PGW-PGG-Wrightson&p=1043694&viewfull=1#post1043694

is telling me this share is worth $3.13, as a 'mid-point' business cycle valuation, based on my required gross yield of 9%. Granted of the five years I was using for business cycle valuation purposes 2021, 2022 and 2023 were exceptionally good. But with shares trading at $1.92 on the market today, that is a 39% discount to my fair value mid business cycle price. For a stable company in a steady sized but cyclical market, my 'rule of thumb' is that 'the bottom' is 20% below my mid business cycle fair valuation. That equates to $2.50. But on the market at $1.92, we are 23% below even that! According to the stockpicking competition, PGW shares have slumped 43.53% just this year. This makes it the worst performing share of all, below even Synlait and Rua Biosciences. This to me is crazy. The receivers are not barking at the PGW gate. Blame the Alan Lai fracas?

I disagree about the dividend being AWOL as far as we can forecast. Alan Lai is an international businessman and he needs cashflow from PGW to keep his other business interests humming. We know that PGW has the capacity, and banking syndicate approval for some level of dividend to be paid. So I think it will happen in the first half of CY2025, once the new Alan Lai lead board is in place.

If farmers need to keep their animals and crops alive, then they will be spending at retail, even if they have to go into debt to do so. If they can't afford to keep their animals, then it is off to the livestock yards with them and PGW clips the ticket. Real Estate does seem to be a perpetual thorn in the side of the PGW empire. But I did hear on the rural news this morning that the price for rural land for the three months to the end of March has not dropped as expected. So at least that is not a negative. It helps to think of PGW Real Estate as part of the old 'One PGW' plan. That is, it opens up cross selling opportunities to new farm owners, even if the Real Estate division is not profitable within itself right now.

The only thing that is stopping me buying even more PGW shares today is my self imposed rule of not being allowed to buy a second order of the same share twice in a row. I have to buy into a different share next, before I am 'allowed' another bite at PGW.



The cost cutting has started. Those expensive Santa Fes, are in the rear view mirror now, just like Christmas. Our local Ford dealer had a yard full of PGW branded Rangers a couple of months ago. PGW is keeping ahead of Farmlands. The new Farmlands Rangers are only making their way onto that same Ford yard now.

SNOOPY

Snoopy, isnt the future of PGW in the hands of the Cushings family and if that is the case wouldnt they be wanting a beaten down s p before making their move ?

[Snoopy]

Snoopy, isnt the future of PGW in the hands of the Cushings family and if that is the case wouldnt they be wanting a beaten down s p before making their move ?

H&G, the Cushing family vehicle, IIRC enabled Agria sell down from their 50.1% majority stake position to a non-controlling position of owning 'only' 44.33% of the company, by divesting shares to a 'friendly ally', H&G. This parcel of shares was later on sold to a Chinese government controlled entity. The Chinese government cannily sold out a year or two back to Elders.

H&G retain a 'rump' of shares listed to number 295,000 in the FY2023 annual report. The Cushings are no longer a defining player in the future of PGW, with their remaining shareholding. I think it would be a big ask, even for them, to launch a full takeover offer for PGW. And success would depend on Agria wanting to sell out, which I don't believe they do.

SNOOPY

[bull....]

timber :scared: massive downgrade

[Balance]

timber :scared: massive downgrade

I would not call it a massive downgrade - $7m from $50m to $43m so 14%.

What is more significant is that it is a second downgrade :

1st downgrade - from $52m in Oct 2023 to $50m in Feb 24.

And we all know that downgrades come in threes, especially when this downgrade is less than 2 months from the last downgrade.

[Snoopy]

Late last year (2023) PGW reduced their EBITDA guidance to $52m, so $50m is a second downgrade. What did you say about downgrades coming in threes? It would come as no surprise to me if the new $50m EBITDA guidance for the FY2024 year was not met. You also have to remember that traditionally most of the profit comes in the first half. So it wouldn't surprise me if PGW only breaks even on a NPAT basis for the year.

I was predicting an interim dividend of no more than 4c. So with rural conditions softening, it is no real surprise there is no interim dividend.

So am I selling out? Quite the reverse. I topped up my holding this morning. Looking through the next business cycle and averaging across the dividend stream, I reckon I am going to get a 10% gross yield. That is far too tasty a prize to leave on the table. Next plan is to free up some of my bank deposit money to buy some more.




I would not call it a massive downgrade - $7m from $50m to $43m so 14%.

What is more significant is that it is a second downgrade :

1st downgrade - from $52m in Oct 2023 to $50m in Feb 24.

And we all know that downgrades come in threes, especially when this downgrade is less than 2 months from the last downgrade.


You need to check that abacus Balance. EBITDA of $43m is downgrade number three. So that is it. We have reached the bottom - phew! Our currency weakening off is the first green shoot that our farmers are turning the corner. Share price up this morning on this bad news, so it was already baked into the boiler. The PGW steam train boiler is indeed building up pressure and the train is preparing to leave the station. See you on board. Don't miss the ride!

SNOOPY

discl: holding PGW and accumulating

[Balance]

You need to check that abacus Balance. EBITDA of $43m is downgrade number three. So that is it. We have reached the bottom - phew! Our currency weakening off is the first green shoot that our farmers are turning the corner. Share price up this morning on this bad news, so it was already baked into the boiler. The PGW steam train boiler is indeed building up pressure and preparing to leave the station. See you on board. Don't miss the ride!

SNOOPY

Fair enough.

[Snoopy]

Interesting to plug this new EBITDA guidance into the 'Consolidated Statement of Profit and Loss for FY2023' and update the the associated cost structures.

Consolidated Statement of Profit and Loss





FY2024 ForecastFY2023 Actual



Operating EBITDA
$43.000m$61.194m



less Depreciation and Amortisation Expense
$29.044m$28.063m


equals EBIT
$13.956m$33.509m


less Net Interest and Finance Costs
$9.440m$9.573m


equals Profit Before Income tax
$4.516m$23.936m


less Income Tax Expense (@ 28% for FY2024)$1.264m$6.418m


equals Profit Net of Income Tax$3.252m$17.518m



Calculation Notes

1/ Costs for FY2024 have been estimated by looking at the HY2024 figures and doubling them.

-------------------

It looks like NPAT is set to fall 81%. But we are still on for a positive result whereas I was expecting 'break even'. So as a shareholder, I am positively surprised by this update. Of course it is possible there will be some stock write down as well. If you are having a bad year, best to get all the bad news out there! So my expectation of breakeven for FY2024 may yet come true. But these write-downs will be 'non cash'. With no dividend, all of the $3.252m operating profit can be put back into reducing the full year working capital facilities drawn from $20m at EOFY2023 back towards $15m. That will help keep the banking syndicate happy. I am calling it. The recovery may not be vigorous. But the corner has been turned.

SNOOPY

[winner69]

Fascinated they talked about soil moisture deficit …’ Drought conditions with soil moisture deficits against historic averages across much of the East Coast, Tasman and Northland over the first quarter of 2024.”

In my other life I have a model I call the ‘3cs’ to see where economy is going …..3 C’s are climate (Soil Moisture Deficit SMD) currency and commodity prices and running a multiple regression analysis gives a good indication where the economy (GDP) is going. Rationale being when things are good on the farm the country is going well so how green the grass is and what prices they are getting is key……with a few quarters lag to allow the cash to flow into the towns.

Model forecasted things are a bit tough at the moment and Snoops too early to call currency a “green shoot” at the moment but who knows

Here’s latest Soil Moisture Map …this year and last year …yellow, oranges and reds not good …and light green a bit dodgy.

[Balance]

timber :scared: massive downgrade

Where is the timber? :D

[Snoopy]

PGW
13/02/2024 16:43
ADMIN
PRICE SENSITIVE
REL: 1643 HRS PGG Wrightson Limited

ADMIN: PGW: Shareholder Meeting Request

Shareholder Meeting Request

PGG Wrightson Limited (PGW) advises that late last week it received the
attached request from Agria (Singapore) Pte Ltd (Agria) requesting that a
special shareholders meeting be convened to consider the resolutions set out
in the notice seeking a number of board changes.

Following receipt of the notice on the afternoon of 8 February 2024 PGW
promptly sought to engage with Agria in relation to the matters outlined in
the notice and sought advice from its external lawyers, Chapman Tripp. The
PGW Board convened on 12 February and 13 February to discuss the notice and
has continued to liaise with Agria to explore whether Agria would withdraw
the request to enable a more constructive board transition to take place.

Following further dialogue today, Agria has this afternoon confirmed that it
will not withdraw the notice requesting that a special shareholders meeting
be convened and accordingly PGW is preparing for a shareholders meeting.

The PGW Board will issue a notice of meeting at the relevant time together
with appropriate information for shareholders about the matters to be
addressed at the meeting.

For media enquiries contact:
Julian Daly
General Manager Corporate Affairs / Company Secretary
PGG Wrightson Limited
Mobile: +64 27 553 3373
Email: companysecretary@pggwrightson.co.nz


Agria feud over? From the 1:45 mark in this report:
https://www.rnz.co.nz/audio/player?audio_id=2018934812

------------

The board is looking forward after fractions in the boardroom. In February, major shareholder Agria called for a special meeting, urging the company to dump three long serving local directors and replace them with four of its own. After board opposition it withdrew the request. But Agria Singapore remains a 44% shareholder in the company. (Chairman) Mr Moore is confident it won't happen again.

Garry Moore:
"There has been a lot learnt about the process and there has been an appreciation of how things work in New Zealand and with that of course the New Zealand Shareholders Association weighed in and gave their view on what was happening and we felt that if we could engage in constructive dialogue with them, sense would prevail and it did."

Question "Do you think having Agria as a shareholder has been in PGGs interest?"

Garry Moore
"Well I think we are aligned now. We are looking to support the company through what is turning out to be a reasonably tough year. But it comes hard after two excellent years. And in a cyclical business, you will always have something that is a bit tougher than at other times. I think the independent directors are very keen to make sure that he company performs for the benefit of all shareholders."

------------------

SNOOPY

[kiora]

Given W69 moisture maps the check books have been slammed shut.You can't get blood out of a stone & PGG can't
get the $ out those cockies pockets?

[Toddy]

Funny. I got an email regarding my PGG account being in credit for 12 months and asking for my bank details.

Im thinking, yeah, get the cr back and buy cheap shares.

[bull....]

Where is the timber? :D

probably still coming

FARMERS' WALLETS CLOSING

New registration data for tractors shows that March 2024 had the lowest level for a March month (excluding pandemic-affected March 2020) since 2010, at just 164 nationwide

https://www.interest.co.nz/economy/127353/review-things-you-need-know-you-sign-thursday-main-bank-trims-td-rates-agent

[Balance]

probably still coming

FARMERS' WALLETS CLOSING

New registration data for tractors shows that March 2024 had the lowest level for a March month (excluding pandemic-affected March 2020) since 2010, at just 164 nationwide

https://www.interest.co.nz/economy/127353/review-things-you-need-know-you-sign-thursday-main-bank-trims-td-rates-agent


Maybe, but where was the timber yesterday?

The sky was falling, remember?

[bull....]

Maybe, but where was the timber yesterday?

The sky was falling, remember?

as tree fellers would say timber , just before the tree falls over.

[Balance]

as tree fellers would say timber , just before the tree falls over.

As BS would say.

[Snoopy]

As BS would say.

It's OK Balance. You don't have to have been around this forum for long to know what to do with bull's 'shock jock' 'down ramping ravings'.


as tree fellers would say timber , just before the tree falls over.

The crazy thing is, all bull has to do is change his handle from 'bull' to 'bear', and his comments wouldn't draw the ire of anyone. A 'bear' handle would let everyone know exactly what flavour of comments to expect from him.

Investors need to keep in mind that the market is always looking at least 6 to 12 months down the track. So farmers not buying tractors today, leaving aside the fact that PGW do not sell tractors, is 'old news' for the market. NZ is still primarily a rurally lead market. So things on the farm have to improve first, before that money filters through to the cities to lift consumer malaise. That means if a hip city dweller is using their own day to day experience of judging where the country sits economically, that view is 18 months to two years behind where the market is pricing rural sector shares today.

Buying PGW shares this month, means I expect to see farming 'green shoots' just before the end of CY2024. I might be wrong about that. It could be a year away or even 18 months away. But the key takeaway this week for PGW is that conditions down on the farm are not materially worse than a month ago. And the board room fracas, that triggered a rapid share price fall, with Alan Lai is over. Yet the PGW share price has declined from circa $3 to circa $2 in a month, with very little change in the company and market fundamentals over that time. 'Mr Market' was either right to value the shares at $2 or $3. But he can't be right with both valuations. Currently, and taking into account that the shadow FY2022 and FY2023 were particularly good years which cast a expectant forward shadow that may never be matched, I would plump for the middle and say fair value right now is $2.50. That is where I expect the share price to sit by the end of the year, before the next farming cycle take off. So people buying PGW shares on the market today at $2 are being paid very well to wait until December. Therein lies my 'buying thesis' for accumulating PGW shares now. Yes no divvie now. But Alan Lai will ensue that dividends return sooner rather than later.

SNOOPY

[winner69]

PGW shareprice was $5.70 odd not that long ago

At $2.00 they must be a steal

[Toddy]

I see that the annual Canterbury AnP show has been cancelled for November 2024.

The main reason given was tough economic conditions. They rely on advertising and sponsorship deals from the Agriculture sector to fund the event.

We are talking about the heartland of South Island farming here.

Alarm Bells?

[Snoopy]

PGW shareprice was $5.70 odd not that long ago

At $2.00 they must be a steal


That $5.70 was based on a couple of stellar years where all sectors of the rural economy grew in tandem (I don't ever recall that happening before), and there was takeover speculation swirling around the company (unjustified in my view, but I can't deny that it was there.) I don't see the future ducks ever lining up like that. So I think I can safely say:
"We will never see the price of PGW shares climbing to the highs of $5.70 and above ever again."

What will the high point be in the next business cycle? If $2 (or thereabouts) is the low, I would say $4 (or thereabouts) will be the high. If things overheat above $4.50, that would be a sell down signal. But even if $2 to $5.70 is a fantasy, $2 to $4 is still a good opportunity.

SNOOPY