Forum Archive Index - December 2002

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Last years golden season, where we had the triple favourable effects 
of a low exchange rate high commodity prices and a good growing 
season has ended.  We all knew that would happen.

So I see no reason to quit Wrightson, when chairman Jon Palmer comes 
out and tells us what we knew was coming already.

Sometimes I think that I must have read a different announcement to 
everyone else.  Correct me if I'm wrong, but Palmer is forecasting a 
first half year profit of $3.15m largely brought about by a $2.5m 
restructuring cost.  This gives an underlying profitability of 
$5.65m, which isn't too far off the $6.3m earned for the first half 
of the financial year last year.

Last years 'golden' performance produced a net profit of $21.2m, of 
which $14.9m related to the second half.  If we assume the underlying 
profitability is reduced for the second half year in the same ratio 
as the first half, this gives a net profit of $14.9 x (5.65/6.3)= 
$13.4m.   Add back in Palmers estimate for the first half year 
result, and we get a full year profit of $16.5m, or $19.0m adding 
back in the one off write off.

$16.5m divided by 134.3m shares on issue, gives an earnings per share 
of 12.3c.  Wrightsons have lots of cash so there is no reason to 
suggest that the overall dividend for the year of 11.5c will be cut.  
With a share price of $1.20 this means that Wrightson's are now on 
an equivalent gross yield of 14.4% (based on a 33% tax rate).

It is possible that further rises in the exchange rate will dampen 
the final result.  It is also possible that if this occurs, more 
farmers will see value in the currency hedging part of Wrightson's 
much touted 'Solutions Strategy', and Wrightson's will benefit.

But the bottom line as I see it is this.  If this is the kind of 
result that Wrightson's can produce in quote:

"the most difficult spring season for farming in the last 20 years"

what sort of performance can we expect in the more favourable 
nineteen years?

It is much better to under promise and over deliver rather than the 
other way around, and this is the tack I believe Palmer is taking.  I 
can't see any reason to sell Wrightson at anywhere near Friday's 
market prices.  But if fickle investors want to give their shares 
away at below $1.20, guess who'll be lining up on Monday to buy them?

SNOOPY

discl: hold WRI

---------------------------------
Message sent by Snoopy 
e-mail  tennyson@caverock.net.nz
on Pegasus Mail version 2.55
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"Stay on the upside of the downside, 
Anticipate the anticipation!"



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