By Hugh Stringleman
Friday 7th June 2002
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In 1999 Wrightson sold its finance division to Rabobank, a move which surprised many Wrightson clients and former staff members. Finance was a good earner and considered the crown jewels of Wrightson.
The $300 million sale was variously interpreted as either a strategic or survival move by the giant rural servicing company, then in the late stages of a costly and disruptive Project Transformation to position a traditional 160-year-old business for the 21st century.
Transformation, under former CEO Greg Kay and chairman Sir Ron Trotter, cost at least $20 million and disrupted earnings, profits and dividends for Wrightson, which was floated off as a public company by parent FCL in 1993.
Many clients reacted to the "unbundling" of Wrightson's divisions by transferring some of their business to competing companies, such as Williams & Kettle, Pyne Gould Guinness, Allied Farmers and Farmlands.
Wrightson managing director Allan Freeth said the lost opportunities included livestock loans, a large part of traditional "seasonal finance" for farmers.
"When we made a livestock sale we couldn't offer the short-term finance, which competitors were able to do," he said.
So Wrightson approached Rabobank, which is an agricultural bank specialising in mortgages and longer-term lending, for approval to re-introduce seasonal finance products in its own right.
"We have started again in a small way, with a new financial services manager," said Dr Freeth, who was finance division GM in 1998-99 when the Rabobank deal was done.
Wrightson's share price has doubled in the past 12 months and now sits around 115c. It recently announced for the first time a nine-month interim result, which was $16 million net profit after tax, and it appears to be on track to double last year's $10 million annual profit and pay better than 10c in dividend.
Dr Freeth said Wrightson's better earnings profile now included about 15% from its "Solutions Strategy," which aimed to sell clients packages of farm advice, new products, improved genetics and marketing options. He would like to see that proportion grow to 35-40%, where it would provide a buffer to the cyclical nature of commodity prices and agency commissions.
"The jury is still out on our Solutions strategy - analysts like what we say but suspect we are still very commodity price exposed. They probably can't rank our biotechnology ambitions, as to whether there is any money in it.
"So when commodity prices start to fall, we may get sold down. We have a long way to go before the share market won't shift on commodity price information," he says.
Meanwhile in the same sector the regional company Allied Farmers has listed on the Stock Exchange, conferring advantages in capital raising and share liquidity.
It went into a scheme of arrangement under financial difficulties in the late 1980s and early 1990s, from which it emerged in 1993 with all creditors paid in full.
It has expanded steadily from a Taranaki base and now operates in King Country and Waikato and, through its specialist plant and equipment finance arm, in Auckland.
In the year to June 30, 2001 net profit after tax was up 36% to $4.3 million on revenue of $138 million. The half-year result to December 31 saw $2.686 million profit.
There are now four listed rural servicing companies - Wrightson, Williams & Kettle, Pyne Gould Guinness and Allied Farmers.
Investor expectations are for all four to have record full-year results when announcements are made in August.
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