PGW - PGG Wrightson

[COLIN]

I can't help but agree with Duncan.
(Good to see you are still around - having been absent for a long time myself, I was wondering as to your "status", i.e. whether you had given up on the rest of us or you had been robbed of all that cash hidden under your mattrass!)

[nwood]

PGG Wrightson Chair Craig Norgate steps down

PGG Wrightson has announced that Craig Norgate has stepped down as Chairman today and has
been succeeded by independent director Keith Smith. Mr Norgate advised of his intention
last month and the Board accepted that decision yesterday and confirmed Mr Smith’s
appointment.

Mr Norgate will remain a director of PGG Wrightson and Managing Director of Rural
Portfolio Investments, which owns a 27.5 percent shareholding in the group.

Mr Smith has been a director of PGG Wrightson since its formation in 2005 through the
merger of Pyne Gould Guinness and Wrightson. He was previously chairman of Wrightson from
2004.

Mr Norgate said his decision to step down reflected the preference for an independent
chair given the listed status of the company and the fact that Managing Director Tim
Miles is now well established after 15 months in his role. "Tim now has a team that is
more than capable of leading the company forward," Mr Norgate said.

Mr Norgate said the change was a natural progression that would allow the company to
identify the governance platform best suited to its next stage of development. This would
be carried out through a formal process to review board composition, currently under way.

"PGG Wrightson is the product of a five-year campaign to revitalise the rural services
industry for the benefit of farmers throughout New Zealand. That process has involved
continuous change – in corporate structures, but more importantly in the way the industry
works with farmers to help them improve their performance and profitability.

"Tremendous progress has been made – in particular, the company has a stronger
operational platform and is therefore better placed to provide the support, advice,
services and products that farmers need. It has a management group with the range of
capabilities needed to build on the progress made to date.”

Mr Norgate was Chairman of PGG Wrightson from October 2007 and was previously Deputy
Chairman. He was a director of Wrightson at the time of the merger with Pyne Gould
Guinness in 2005. He will remain on the board of associated companies NZ Farming Systems
Uruguay and Wool Partners International.

[southernerx]

Perhaps that's right Bowman, but this share at least, is one where you can do your homework quite easily. Have a look inside one of the stores and see if it's busy. Look at the books and figure out the profit margin for the average sale (it's low).

-elZorro-

And keep checking livestock prices (livestock commisions), farm sales (real estate commissions) and farm debt (PGW have a very profitable finance division). Store lamb prices have been very strong recently, which helps dampen the impact from dairy. At some point they will be a buy, and you can probably spot it coming.

[Dr_Who]

Agreed. Wait for the capital raising.

It will have to be one enormous capital raising and sh will be diluted to buggery.

Looks like some bad news coming out soon with Norgate stepping down?

[COLIN]

It will have to be one enormous capital raising and sh will be diluted to buggery.

Looks like some bad news coming out soon with Norgate stepping down?

And neither RPI nor PGC are likely to be taking up their respective percentages - they will have enough capital-raising challenges of their own to cope with.

[JBmurc]

It will have to be one enormous capital raising and sh will be diluted to buggery.

Looks like some bad news coming out soon with Norgate stepping down?

I'm very glad I only held PGW for a couple weeks (was looking at a short term trade)
an only lost very few $$$ could have been alot worse

Also think my mate that had been hold for years will be happy he sold at an average of 1.31
after I told him what I thought of them...

[Snoopy]

It will have to be one enormous capital raising and sh will be diluted to buggery.

Looks like some bad news coming out soon with Norgate stepping down?

I think Norgates position as Chairman has been untenable since the failure of the Silver Fern Farms merger deal. I don't see Norgate stepping down from the Chairman's role now as a forerunner of more bad news.

As for the balance sheet, 6 months ago PGGW renegotiated a $475m debt facility through the ANZ,BNZ and Westpac. Now if Norgate had negotiated at $475,000 facility with the banks he might be in trouble. But with potentially $475m in outstanding debt, it is the banks who have the problem. And I don't think ANZ,BNZ or Westpac see themselves as owner operators of a chain of rural supply stores.

We are told from HY Report 2008 that as at February 2009, debt drawn was $410m, down from $425m on the 31st December HY2008 balance sheet date.

If we inspect that balance sheet more closely there is more debt in the form of $213.2m of trade creditors (offset by $342.7m of trade receivables). That represents $130m of net money owed to PGW which is slightly up from the equivalent figures in FY2007 ($286.5m-$159.9m=$126.7m net PGW receivables outstanding). So there is definitely room for recovering some capital here.

Total liabilities are listed at $1.147m, with total equity of $413.7m. So let's say PGW was looking to raise another $413.7m in new capital by September 2011. If that capital was brought in today then earnings per share would halve. But even if total PGW earnings decline to $30m, then that still represents eps of $30m/(2x289.3m)= 5.2cps. Based on a share price of 95c that gives a diluted capital P/E of 18 at the low end of the business cycle.

I am not in the market to buy more PGW shares now (except through the dividend reinvestment scheme). But neither am I prepared to sell at today's prices.

SNOOPY

[whatsup]

D.....M... wasnt the low .65 ---wayt2go yet!!!

[Dr_Who]

With Norgate not in control, they can do a capital raising?

The bank debt contract must have a clause if the sp falls to a certain level it will breach covenants?

[Snoopy]

With Norgate not in control, they can do a capital raising?

Sure. A capital raising will probably be easier now that Norgate is no longer in the top seat

The bank debt contract must have a clause if the sp falls to a certain level it will breach covenants?

We don't know the exact terms of the arrangements PGW have come to with their bankers.

The share price will affect the price PGW can go to the market for capital, if they need to go to the market for new capital, but that is all.

We know that the bankers are happy with PGWs plans to manage the business until September 2011.
We also know that the largest shareholder, Craig Norgates RPI, would be unwilling or unable to put more capital into the company.
We know that PGW are looking to unload some company property to strengthen their balance sheet.

So what is to stop PGW selling off another part of their business if the debt covenants become an issue? That is one way to get around new capital raising.

Generally banking covenants will relate to cash operational performance in the form of EBITDA/I (for example).

SNOOPY