Allied Farmers doubles profits
Allied Farmers has more than doubled its net profit thanks to a rebounding livestock agency business.
Speaking at its annual meeting last week, Allied Farmers chair Shelley Ruha said the company continues to utilise tax losses and therefore paying unimputed dividends is not the best use of its funds.
Ruha said the board strongly believes that in the short term, retaining and redeploying earnings is in the company's best interests.
Allied shares were hovering around 83/share, its highest level in 18 months. For the year ending 30 June 2023, Allied Group reported net profit before tax of $4 million compared to $3.5m for 2022.
Ruha notes that this is a consolidated group result that includes profit attributable to NZ Farmers Livestock's minority shareholders, therefore it is more meaningful to highlight the profit attributable just to their shareholders. "For FY23 this was $3.3 million, which was a pleasing increase of 16.06% from the previous year's $2.9 million, which in itself was an outstanding year."
Ruha says the increased 2023 profit was driven by increased returns from NZ Farmers Livestock - largely from veal processing - but offset by lower transaction and performance fees from NZ Rural Land Management.
The year's highlight was the acquisition in March of the 50% balance of NZ Rural Land Management, now 100% owned by Allied. The purchase was funed without a capital raise - by a mix of cash, debt and the transfer to the vendors of a number of NZRLC shares owned by Allied Farmers.
Ruha says the debt component has improved Allied Farmers' capital funding mix.
She says the board is confident that it will continue to demonstrate that it has been an excellent investment for Allied. The acquisition led to governance changes, with NZRLM co-founder Richard Milsom appointed as Allied Farmers managing director and Ruha becoming chair.
Commenting on the business performance, Milsom says each of the NZ Farmers livestock business areas - livestock agency, veal and finance - improved on the prior year to achieve consolidated earnings 41.1% ahead of the prior year.
He says the livestock agency business was again challenged, with difficult weather, some reduction in meat and dairy market prospects, the impact of stock processing space constraints, and plenty of grass through the summer making for an unusual year.
"The business's primary exposure to Cyclone Gabrielle was via our interest in Redshaw Livestock and it is notable that this team performed extremely well as it supported clients through the major disruptions involved."
The livestock financing activity combines a referral business funded by Heartland Bank and short term bull, lamb and other livestock financing conducted with the support of Allied Farmers' main business banker.
