Ruralco’s Stock Dipped On Interim Results For 1HFY19

Ruralco’s Stock Dipped On Interim Results For 1HFY19

Ruralco Holdings Limited (ASX: RHL) is an agribusiness company with business interests in Financial Services, Water Services, Livestock Export and Rural Services. The company reported 3% growth in its revenue to $686.1 million for the first half of Fiscal 2019.

Financial Highlights (Source: Company Announcement) 

RHL also released an Investor Presentation for the half year ended 31 March 2019. As per the presentation, RHL adopted underlying measures of profitability for presenting results, both, on underlying and reported basis.

Reported Basis

The revenue growth reported in interim result is majorly driven by the company’s live export division, real estate commission and water broking. Due to challenging season and commodity headwinds, 1H19 NPAT declined 4% to A$15.5 million in comparison to the previous corresponding period. This reflects the one-cost incurred during the period with respect to restructuring, acquisition and related activities. EPS declined to 14.7 cents for 1H19 compared to 15.3 cents in 1H18.

Underlying Basis­ ­­–

The underlying basis excludes cost incurred like A$1.1 million in restructuring and related expenses which then too006B NPAT to A$ 16.6 million. The cost basis efficiency led to 2% growth in the underlying EBITDA to A$ 37.7 million in 1H FY19.

Business Overview

  • Rural Services – Geographically diverse business and tight cost control enabled the company to offset declines in cattle prices and wool volumes and maintain earnings at steady levels with decent fertiliser sales.
  • Water Services – Despite the recent acquisitions in 2018, underlying EBITDA remained flat at $9.6 million. Further, season conditions resulted in declined investment sentiment in farmers.
  • Financial Services – The division continued growth in its insurance, finance and broking activities. Seasonal finance loan book and flexi finance loan book increased by 11% and 19% respectively along with 4% change in Ausure insurance GWP.
  • Live Export – Despite higher feed costs and escalated competition in South East Asia cattle market, the division witnessed strong growth in volumes to Indonesia. The division returned to profitability with underlying uEBITDA of A$0.1 million.

Travis Dillon, CEO & Managing Director, stated that the half year had delivered resilient earnings output on the back of diversification, geographical footprint and activities. He mentioned the success of adopted strategy which has delivered strong results amid mixed seasonal conditions and commodity headwinds.

The Board declared an interim fully franked dividend of 10 cents per share with a record date of 31 May 2019 and payment date of 18 June 2019. This represents a dividend payout ratio of 63% of underlying first half earnings.

Stock Performance:

RHL stock was down 0.903% by the end of the trading session to settle at A$4.390 on 14 May 2019. The stock closed at a price to earnings multiple of 18.440 x with a market capitalisation of $465.38 million.

Over the past 12 months, the stock has gone up by 43.37% including a positive price change of 46.69% recorded in the past three months. The 52-week high and low are A$4.510 and A$ 2.750 respectively with circa 465.38 million shares outstanding.


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