It says the goodwill largely arose as an accounting entry from the 2005 merger of rural entities PGG and Wrightson.
A lower share price, slower-than-expected recovery and a range of external variables led the board to write down the historic goodwill, says PGW chairman Sir John Anderson.
Anderson says the write-off will have no impact on the company’s operations.
“The investment market currently does not attribute value to the goodwill and writing it down has no effect on the company’s day-to-day business or banking arrangements and no bearing on our ability to generate cash or on our dividend policy.
“We expect to see continued improvement in the fundamental performance of the business through 2013-14 based on stronger agricultural commodity prices and assuming a return to normal conditions onfarm.”
The company reported a gross profit of $45.8m for the year ending June 30 2013. It says ignoring the goodwill write-down, a profit of $14.6m would have been posted compared to last year’s profit of $24.5m. Shareholders will next month be paid a dividend of 1c/share, on top of 2.2c paid in March.
PGW’s new chief executive Mark Dewdney says the operating result is a solid achievement.
“Drought in the North Island and in parts of Australia, as well as reduced prices for key agricultural commodities, made late-autumn trading conditions challenging and our business units experienced varying fortunes.
“Despite this our business is in good shape. Our people, and the strength of their relationships with customers, are the key to our success. Customer satisfaction and staff engagement measures show we are making excellent progress in these critical areas.”
PGG Wrightson’s retail, wool and irrigation businesses performed strongly with improved market share in key categories. Livestock, real estate, seeds and grain faced challenges.
Year-on-year trading figures in many rural supplies stores were up, and its irrigation business showed excellent growth, particularly because of large irrigation schemes coming on stream in the South Island.
The full year benefits of reintegrating the wool business back into the broader group improved performance and reduced support costs.
However, the drought and lower market values for lambs took a toll on farm profitability, and this is reflected in the livestock business, says Dewdney.
“Timing of rainfall in dairying regions is a factor in the fortunes of our Australian seed business, and conditions resulted in poorer than expected sales.”
