PGG Wrightson's FY profit to halve as costs increase; trading result seen improving

The Christchurch-based company said net profit was about $20 million in the year ended June 30. Photo by Lynn Grieveson

PGG Wrightson said full-year profit was less than half of last year's as the rural services firm faces backdated holiday pay obligations to its staff, higher costs, and an absence of property gains.

The Christchurch-based company said net profit was about $20 million in the year ended June 30, down from $46.3 million last year. The company cited a one-off provision for the remediation costs of historical liabilities under the Holidays Act 2003, which could cost $6 million after tax, as well as increased depreciation due to recent investments in technology, unrealised losses on its export currency hedges, a higher interest expense and effective tax rate, and an absence of gains on the sale of properties which added $8.7 million to profit last year.

Still, it said operating earnings before interest, tax, depreciation and amortisation, which is an indication of how the company's businesses are trading, was at the top end of its previous guidance range of $65 million to $70 million following "very strong performances" from its retail and water and agency businesses. That's up from $64.5 million last year.

Chief executive Ian Glasson said it was “very satisfying to see the trading result at the top end of the forecast range and well up on the prior year."

"This is an operating result the company can be proud of and is a reflection of the strength of PGW’s diversified portfolio of businesses," he said in a statement. "At the same time PGW’s FY2018 NPAT result is impacted by the unintended consequences of misinterpretation of the Holidays Act as is the case with many other large New Zealand employers in recent times.”

Wrightson expects to report its full-year earnings on Aug. 14.

In October last year, Wrightson hired Credit Suisse (Australia) and First NZ Capital to run a strategic review of the business, and today Glasson said the company is continuing to work with those advisers on the strategic review including its growth opportunities, capital and balance sheet requirements, and potentially shareholding structure and hopes to be in a position to comment further on outcomes of the review in the coming months.

Its shares last traded at 66 cents, having increased 12 percent over the past year.