Pgg Wrightson Limited · NZX:PGW
Pgg Wrightson — FY2008 Earnings Presentation
40 slides from Pgg Wrightson's earnings presentation, Aug 19, 2008
Slide 1: PGG Wrightson Limited Results briefing
PGG Wrightson Limited Results briefing Year ended 30 June 2008
Slide 2: Programme
Programme • Overview – Craig Norgate • MD’s Review – Tim Miles • Financials – Mike Sang • Outlook – Craig Norgate • Questions
Slide 3: Overview
Overview Craig Norgate Chairman
Slide 4: Financial Results
Financial Results 2008 2007 Change % Reported NPAT $73.2m $40.6m +80% NOPAT* $39.2m $29.0 +35% EPS $0.25 $0.14 +79% FY DPS $0.16 $0.12 +45% * Excludes performance fee, share appreciation, capital gains and other one-offs
Slide 5: Financial Results
Financial Results • Strong performance improvement across all divisions has improved breadth of earnings • Improved core earnings reflect: – Underperforming areas addressed – Strong focus on cost control – Focus on helping clients grow value – Strategic investment and growth • Tribute to former CEO
Slide 6: A relentless focus on the interests of our clients
A relentless focus on the interests of our clients • Our mission is to work with our clients to help them become more productive and profitable • Continuing investment in – People – New products – New businesses – New technologies • A substantial and meaningful response to clients’ call for action o
Slide 7: Managing Director's Review
Managing Director’s Review Tim Miles
Slide 8: Market Overview
Market Overview • Mixed operating conditions – Adverse NZD and interest rates for much of the year – Long periods of dry weather in NZ and Australia – Poor returns to sheep and beef producers – Dairy boom ongoing – Strong expansion in viticulture and vegetables – Increasing costs – eg. fertiliser an
Slide 9: Farm Returns: Dairying
Farm Returns 12 months to 31 May Dairying $s per kilo of milk solids 10.00 9.00 7.80 8.00 7.00 7.00 6.00 5.00 4.25 4.50 4.10 4.46 3.66 4.00 3.00 2.00 1.00 0.00 2003 2004 2005 2006 2007 2008 2009 forecast Source: Fonterra Milk Solids Payment
Slide 10: Farm Returns: Sheep and Beef
Farm Returns 12 months to 30 June Sheep and Beef Farm profit before tax 100 89.7k 90 73.3k 80 66.8k $ Thousands 70 53k 60 50 41.7k 40 29.1k 30 19.4k 20 10 0 2003 2004 2005 2006 2007 2008 2009 est @ USD.75 Source: Meat and Wool New Zealand Economic Service
Slide 11: Business Group Results
Business Group Results Operating EBIT 2008 2007 Change % Rural Services $40.1m $26.7m +50% Technology services $35.5m $30.9m +15% Financial services $40.3m $17.6m +129% South America $2.5m $1.9m +32% Corporate ($16.8m) ($16.9m) - Total $101.6m $60.2m +69% Each business group has contributed to the i
Slide 12: Rural Services
Rural Services $millions FY08 FY07 ∆% Sales 818 716 +14% EBIT 40.1 26.7 +50% Margin 4.9% 3.7% +1.2% Rural Supplies Fruitfed Supplies Irrigation & Pumping Livestock Wool
Slide 13: Rural Services
Rural Services Rural Supplies • Stronger position in a competitive market • A significant improvement in earnings • Some input costs reduced through purchasing programme • Management changes have been positive – merger benefits now coming through Fruitfed Supplies • Performed strongly against vigoro
Slide 14: Rural Services
Rural Services Livestock • Solid performance in difficult market conditions • Sheep prices and tallies down • Offset by higher dairy prices and tallies Wool • Performed well in the conditions and lifted earnings • Prices down with the high NZ$ • Lower demand – bale numbers down 21% • Market share st
Slide 15: Financial Services
Financial Services $millions FY08 FY07 ∆% Sales 135 85 +59% EBIT 40.3 17.6 +129% Margin 29.8% 20.7% +9.1% Finance Real Estate Insurance Funds Management
Slide 16: Financial Services
Financial Services PGG Wrightson Finance • Maintained growth and improved performance – Total book grew 31% to $532m – Retail deposits increased by $34m – total now $312m • Targeted first mortgage on rural property • Retail reinvestment rate exceeds 80% • Key bank funding lines extended and expanded
Slide 17: Financial Services
Financial Services Insurance • Continued growth through new products and broker network expansion Funds Management • Reflected rapid progress of NZS – 36,300 ha purchased – Conversion on track despite summer drought • Performance fee $17.8m based on total shareholder return of 43% • Second capital r
Slide 18: Technology Services
Technology Services $millions FY08 FY07 ∆% Sales 299 210 +42% EBIT 35.5 30.9 +15% Margin 11.9% 14.7% -2.8% Seeds and Grain Animal Nutrition Training and Consultancy
Slide 19: Technology Services
Technology Services Seeds and Grain • Australian reach expanded by purchase of Auswest • Continuing sales growth despite the impact of lower rainfall in Australia • Significant increase in sales of proprietary cereals • Strong performances in grain trading and maize • Growth in Sth American business
Slide 20: Technology Services
Technology Services Animal Nutrition (Agri-feeds) • Improved logistics • Demand increase driven by – Higher milk prices – Supplementary feed for drought conditions • 4Seasons purchase Training and Consultancy • FarmSafe programme highly successful • Reduced demand for short course industry training
Slide 21: South America
South America $millions FY08 FY07 ∆% Sales 56 18 +211% EBIT 2.5 1.9 +33% Margin 4.5% 10.4% (5.9%) South America • Significant investment in infrastructure and resources to support growth and NZFSU • Ongoing strong sales growth – including to NZFSU • Further development towards a full service busines
Slide 22: Strategic focus
Strategic focus • Aligning around our clients • Developing new capabilities through investment in people • Focus on science and technology • Industry leadership • The partnership with Silver Fern Farms • Further expansion in Financial Services
Slide 23: Aligning around our clients
Aligning around our clients • Structured research to develop the agenda for change • Determination to act on client views and interests – Canvassing client views on the meat industry – Letter to clients led to action • Investment in people and resources at District level • New IT systems – eg. in ER
Slide 24: Developing new capabilities through investment in people
Developing new capabilities through investment in people • Reshaping the senior leadership team – capability to execute strategy and deliver to clients – ensure resourcing and focus on key priorities • Executive appointments to build new skills and capabilities • Management and leadership in the dis
Slide 25: Focus on science and technology
Focus on science and technology • Ongoing commitment to develop the farming products of the future • Particular focus on new cultivars and animal nutrition • International leader in forage innovations • Novel endophytes for ryegrass and tall fescue • R&D partnerships in NZ & Australia – with links t
Slide 26: Industry leadership
Industry leadership • We want NZ agribusiness to succeed – not just compete • That requires successful industry structures – some current structures are outdated and ineffective • We are prepared to step up to the challenge of change – and to invest where needed to achieve it • Our preference is to
Slide 27: The partnership with Silver Fern Farms
The partnership with Silver Fern Farms – a true win/win arrangement • We can succeed and have opportunities for growth only if our clients are succeeding • Strongly positive feedback from farmers – vote scheduled for 8 September • A financial boost of $220m to accelerate the market strategy • The cr
Slide 28: Further expansion in Financial Services
Further expansion in Financial Services • Further development and growth in PGG Wrightson Finance • Supporting the expansion of NZ Farming Systems Uruguay (NZS) • Potential to replicate the NZS model elsewhere
Slide 29: Financials
Financials Mike Sang Chief Financial Officer
Slide 30: Financial Summary
Financial Summary 2008 2007 Reported NPAT $73.2m $40.6m Operating cashflow $26.3m $41.1m Total assets $1.45b $1.17b Shareholders Equity $480m $436m NPAT per share 25 cps 14 cps Full year dividend 16 cps 12 cps * Excludes performance fee, share appreciation, capital gains and other one offs
Slide 31: Financial Summary
Financial Summary $million FY08 FY07 ∆% Revenue 1,315 1,034 27% Trading EBIT 83.8 60.2 38% NZS Performance Fee 17.8 0 NA Operating EBIT 101.6 60.2 +69% NZS Unrealised Gain 18.8 0 NA Other 1.3 11.6 -89% Total EBIT 121.7 71.8 +69% Net Interest 25.3 18.2 27% Profit Before Tax 96.4 53.6 +80% Profit Afte
Slide 32: Financial Ratios
Financial Ratios FY08 FY07 ∆ Revenue $1,315m $1,034m 27% Operating EBIT to revenue 7.7% 5.8% +1.9% Operating EBIT to interest 4.0 3.3 +0.7 Core Debt* $312m $230m +$82m Operating EBITDA:Core debt 3.1 3.8 -0.8 * Excluding PGWF
Slide 33: Balance Sheet
Balance Sheet $million 2008 2007 ∆ Total equity 480 436 +44 Finance Receivables 507 402 +105 Current assets 471 359 +112 Non-current assets 467 405 +62 Total assets 1,445 1,167 +278 Finance Liabilities 312 276 +36 Bank borrowings - PGW 312 230 +82 Bank borrowing - PGWF 140 75 +65 Other liabilities 2
Slide 34: Debt
Debt $million Facility 2008 2007 PGGW Finance Ltd* 180 140 75 Other PGW companies 441 312 230 Total bank debt 621 452 305 ASB (off balance sheet) 100
Slide 35: Core Debt Drivers
Core Debt Drivers $million 2008 Impact on debt Operating cashflow (26) Increase in PGWF equity +15 Acquisitions and investments +82 Capital expenditure +17 Debt classified for sale (16) Other (sales, cash dividends etc) +10 Net increase in debt +82 Note ( ) indicates a reduction in debt
Slide 36: PGWF Balance Sheet
PGWF Balance Sheet $million 2008 2007 ∆ Finance Receivables 503 393 +110 Other Assets 3 2 +1 TOTAL ASSETS 506 395 +111 Finance Liabilities 312 276 +36 Bank debt 140 75 +65 Other Liabilities 1 5 -4 Equity 53 39 +14 TOTAL LIABILITIES & EQUITY 506 395 +111
Slide 37: Outlook
Outlook Craig Norgate Chairman
Slide 38: Outlook
Outlook • Worldwide outlook for agriculture strongly positive – Structural shift in food prices – Dairy prices expected to remain firm – Lamb and beef prices improving – Decline in NZ dollar – Trend to dairy conversion likely to continue • PGG / Wrightson merger has delivered – Company executing wel
Slide 39: Outlook
Outlook • Given continued improvement in underlying performance across all divisions… • Outlook for current year substantially above market expectations • NPAT expected in range from $50m-$55m • Includes $4.2m performance fee on NZS – share price for final quarter $1.87 – excluding any share price a
Slide 40: Questions
Questions a PGG Wrightson