Fingers crossed for Wrighton's latest rejig

Friday 8th October 2004

Some companies seem to be in a perpetual state of restructuring as directors adopt and dump a procession of strategies.

That could be why Goldman Sachs JB Were entitled a recent report on Wrightson: What if Everything Goes Right?

This year saw the departure of Wrighton managing director Allan Freeth after Rural Portfolio Investments took control.

The company shortly afterwards released a result that was even worse than the market had feared. The acting chief executive admitted key strategies had failed to gain traction. One was the rescue plan for the rural supplies division, whose earnings have fallen from $8.4 million three years ago to just $1.5 million last year.

The most recent strategy is to cut high corporate overheads, which sharebroker Forsyth Barr estimates at about $30 million a year, by distributing operational control around the divisions. The broker says this could cut $7 million from annual costs.

Another promising move is the re-establishment of a finance arm. Wrightson sold the original to Rabobank.

In the short term a planned $36.5 million share buyback, re-gearing the company's "lazy balance sheet," should support the share price.

Forsyth Barr is cautiously optimistic.

"We believe the longer-term outlook for Wrightson is promising. However, there remain considerable risks to the restructuring process."

GS JB Were says the shares could be worth $2.63 if potential short-term gains are captured, the finance book is built up and rural supplies is fixed.

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