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[sharechat] WRI interim comment

From: "" <>
Date: Wed, 25 Feb 2004 18:03:00 +1300

Now the result has gone to press, it is time to see how it squared up 
with my prediction.

The 20% profit decline happened, although the headline profit decline 
was greater.    This is because the half year to 31st Dec 2002 did not 
contain any contribution form Genesis research, which this year meant 
WRI had to take a $0.7m dollar hit.  That is where the 34% WRI 
headline profit decline figure came from.

It is disappointing that the $2.7m restructuring initiatives, instituted by 
the company in the December 2002 half year, have yet to bear fruit.   
Apart from telling us the retailing arm is not as efficient as it should be, 
that is!   Adding back these restructuring costs into the 2002 result, we 
can see that the underlying effect is a NPAT reduction from $5.8m to 
$2.7m.    Perhaps that explains why the interim dividend was savagely 
cut from 3.5cps to 2.5cps.

Still, I predicted the reduction in dividend.   It is just that I thought MD 
Freeth would wait until final dividend time to cut it!    

I am not sure where Macdunk's 'Bloody Chemist' line came from.  
Information I have is that Freeth gained his PhD in population 
genetics.   But since moving into the 'real world', and with an MBA 
under his belt, Freeth has been a finance man for many years.     If 
there is a problem within Wrightson governance it is the lack of retail 
experience at board level.   But that is a drum I have been beating for 
a long time!

Also unlike some NZ company's forays into Australia, the WRI 
operation over there is highly profitable and is on target to deliver $3m 
or so in earnings on $21m of turnover.    The 'loss' posted this half year 
is simply because the operation is seasonal.    The Australian 
profitability is *very* significant.    It means that Australian investors will 
be able to access franking credits from WRI for the first time this year.   
Don't be surprised to see an influx of Aussies on the share registar!

Freeth was a bit vague on giving specific profit projections for the 
second half.   So I will stick to my $13.3m, less another 0.7m as the 
second half's equity accounted loss from Genesis.   That means WRI 
are on target for a full year profit of $15.3m, an 18% reduction on 
FY2003.   $15.3m equates to 11cps.    Taking into account the lower 
than expected interim dividend of 2.5cps, I will bump my final dividend 
estimate up to 6.5cps.    At a price of $1.22, that means a dividend 
yield of 11% gross.    Good by NZ standards and sensational by 
Australian standards!   Then we have the Norgate factor.   Will he 
stand in the market for more shares?    If WRI can get any traction in 
their rural supplies business, I can't build an F/A case for selling at 
these prices.


discl: hold WRI

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