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/li...2042201592.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 Forecast	FY2023 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/scr...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/scr...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.