The hint came from chairman Rodger Finlay when he told shareholders at Tuesday’s annual meeting in Christchurch the directors’ expectation is for an interim dividend of not less than 8c a share.
This is half a cent or nearly 7% more than last year’s interim and final payments each of 7.5c a share after allowing for the group’s change in capital structure.
The payout boost relies on trading staying within the guidance, Finlay said at a positive annual meeting, the first since PGW sold its big seeds business, his first as a director and Stephen Guerin’s first as chief executive.
With the seeds business sold it is time for PGW’s Fruitfed Supplies business to show itself as the true crown jewel of the group, Finlay said.
“It’s not had enough time in the sunshine.”
The Ebitda earnings guidance included the impact of estimated savings of more than $2.5m from corporate restructuring following the seeds sale, Guerin said.
It also assumed a more normal trading pattern than the difficult environment last year, continuing confidence in commodity prices and further Fruitfed gains.
Ebitda last year was down to $24.4m, compared to $35.5m in the buoyant 2017 year. The seeds sale led to a big, one-off, after-tax profit and a big return of capital to shareholders.
In reply to a shareholder question chief financial officer Peter Scott said based on the Ebitda guidance of above $30m this year’s after-tax figure could be expected to be in the more normal $15m to $20m range before the impact of accounting rules on non-operating issues.
While allowing for reduced confidence among farmers in the face of environmental and regulatory hurdles, PGW noted the continuing strong commodity prices.
Finlay and Guerin were bullish about the prospects of Fruitfed and major initiatives in the livestock arm of the agency business, the Go products funding client livestock trading and the new Bidr business with its virtual stock auctions.
Farmers can borrow Go funds for sheep and beef buying and finishing before onselling. Last year peak funding was $49.3m, right up against the $50m cap on the programme. Finlay said further funding is the highest priority for the group in its free cashflow budgets and the board is reviewing how it can grow.
“We know that other funding players want to be part of it but it’s ours. It’s a unique bond with our customers and at this stage we’re not prepared to share.”
Also, on livestock, a shareholder asked about opportunities for the group to take advantage of sheep meat demand resulting from Brexit.
Guerin said there are signs, with dairy farms being bought to move back to sheep and beef, and demand from clients for sheep genetics that over the next couple of years there could be a lift in sheep numbers because of strong sheep meat demand and prices.
When a shareholder lamented the seeds sale and said he did not feel better-off as a shareholder, Finlay replied “We will have to prove we are better off”.
Seeds had become a much bigger business than its historic levels, requiring substantial capital to keep growing and not delivering consistent earnings.
“They were very volatile, very good or very bad.”
Later, he said the sale also meant PGW does not have to worry about South America, part of the seeds business.
He was not on the board when the sale to DLF Seeds was agreed but the price was exceptional on any measure, he said.
Seed technology intellectual property was not lost to NZ with the sale because it is owned in joint-ventures with Crown research institutes.
“Rather than having sold it off, we are also selling it every day to our clients through the seeds sales agreement with DLF.”
Before becoming chief executive Guerin ran Fruitfed as the retail and water general manager and he showcased it in his address.
The horticulture technical specialist has averaged 4.9% annual revenue growth since 2015 for cumulative growth of 24.6%.
“The team is very proud of this and has positioned the business to continue to grow as several key crop sectors continue to invest in and develop further land for production.”
Last year staff did more than 60 pre-commercialisation trials and 250 treatments were tested cross the Fruitfed, Rural Supplies and Agritrade businesses. About half of them were proprietary chemistry.
Four new agri-chemical products, taken through trial programmes, will be launched for retail sale this year.
There is also innovative chemistry in the pipeline in a joint-venture with a multi-national company, which wanted to partner with PGW because of its technical capability, market reach and ability to take product to market. Similar partnership models are being discussed with other companies, Guerin said.
