Restructuring within the Ruralco farm services company has eroded its 2015-16 after-tax profit to $4.2 million – down from last financial year’s $14.1m.
Although the rural agency and water services group posted strong results in its core traditional business, with rural supplies gross profits up 16 per cent to $118m and agency gross profits up 3pc to $105m, the company has spent $14m on restructuring and divestment costs.
The restructure included shutting down half its live export business, which is now focused solely on taking cattle from northern Australia.
Underlying gross profit lifted from last year’s $297.7m to $304.9m after revenue increased 10pc to $1.8 billion.
Ruralco’s branch network is also poised to expand with the acquisition of the TP Jones and Company’s four outlets in Tasmania.
In fact, it has added 19 rural supplies and water “points of presence” to its network in the past year.
It’s Total Eden water network recently acquired five additional stores in the NSW Hunter Valley and in South Australia, after closing four underperforming stores and re-shaping its management as part of the group restructure in the past six months.
Managing director, Travis Dillon, said Ruralco’s restructure and disciplined balance sheet management provided a solid foundation for future growth.
“While it is disappointing that our bottom line has been impacted by the restructuring in water and live exports and divesting our non-core farm machinery business, we are in a much better position to take advantage of changing market conditions,” he said.
Mr Dillon said Ruralco had substantially increased its water services capability in eastern Australia to match the strength of the business in Western Australia and more acquisitions were in the pipeline.
Ruralco’s insurance business is also about to merge with Ausure Consolidated Brokers to improve its representation Australia-wide and improve the range and price options for insurance products.
Ausure is part of the ASX-listed Steadfast Group.
Mr Dillon expected further development opportunities for the financial services business, particularly because of the farm sector’s need for fresh capital which was stretching the limits of the traditional lending sources, notably banks.
As climate change and high livestock prices pushed farmers to invest in new technology and assets there was a “clear gap in the market for our innovative finance team and their intimate customer knowledge”.
Ruralco will pay a fully-franked two cents a share dividend for the second half of 2015-16, taking its total for the year to 10c a share compared with 16c dividend in 2014-15