PGW - PGG Wrightson

[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/scr...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/scr...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?