Ruralco’s Stock Arrowed Up Post Its Annual General Meeting

Rural and Property services company, Ruralco Holdings’ stock traded at slightly higher levels on the day of its Annual General Meeting held on 1 February 2019. The stock price surged up by 0.99% or $0.030 and last traded at $3.060.

In the Annual General Meeting presentation, Ruralco Holdings Limited (ASX: RHL) has reported its Fiscal 2018 revenue of $1.9 billion, up 5% on the previous corresponding period. Whereas, there has been a decent improvement of 10% in the bottom line of the company with the Net Profit After Tax (NPAT) amounting to $28.8 million, up from $26.1 million in Fiscal 2017.  

The growth in financial performance of the company during FY18 represents the substantial rise in the company’s water services business. Increased scale in Water Services has delivered 63% growth in EBITDA, with Water gross profit now representing 22% of total Ruralco gross profit.

Ruralco’s Earnings Before Interest, Tax, Depreciation, and Amortization for FY18 also rose up to $70.1 million against $65.4 million reported in previous corresponding year. The company has reported 0.3% growth in the EPS and thus FY18 EPS came in at 27.5 cents per share, and also significant improvement was witnessed in operating cash inflow, which came in at $34.6 million.

Further, the acquisitions made in FY17 have substantially contributed to the group’s earnings. A resilient Rural Supplies result and excellent cost control helped offset declines in Livestock Agency gross profit in Rural Services, state the company.

The company’ earnings resilience is based on its diversification strategy which is said to be driven by three priorities, i.e., Investment, Integration, and Innovation. The company stated that the drought this year has tested and reinforced the success of this strategic focus.

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Its strategy further underpins the activity mix displaying benefits of increased scale in Water Services and Financial Services and continued benefit from ongoing targeted acquisitions to fill gaps in company’s network, extending both geographic and activity diversification.

For FY2019, the company confirmed stable sales for Ag Supplies despite the continued mixed seasonal conditions geographically. There has been the recovery in water retail sales activity over peak summer trading period compared to the prior year, as per the report.

The report read that there have been continued penetration of Seasonal Finance and Flexi Finance working capital finance products with growth in both limits and drawn balances across the quarter, but seasonal conditions are continuing to lead to low draw-downs of livestock-related financing.

The company also announced that its Non-Executive Director Mr. Michael Millner has stepped down from the company’s Board, effective from the conclusion of Annual General Meeting.

Outlook:

The company expects to witness its first-half year earnings similar to the same period last year on the back of the benefits of diversification and ongoing disciplined cost control. However, sales volume in Western Australia is expected to continue to be under pressure, with economic conditions in the state impacting spend on projects.

Looking into FY19, the company eyes that reduced loan draw-downs from continuing tough seasonal conditions could impact finance commissions revenue. Ruralco is also facing challenging situations in SE Asian market dynamics with excess industry capacity posing a risk to profitability.


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