By Gareth Vaughan
Rural lender PGG Wrightson Finance has laid off 16% of its staff as it down sizes to match a shrinking loan book.
PGG Wrightson Finance CEO Mark Darrow told interest.co.nz 10 jobs were cut towards the end of 2010 leaving the firm with 52 staff. The company's interim report, released yesterday, noted the cuts would lead to annual savings of NZ$800,000 and NZ$100,000 of costs stemming from restructure were included in PGG Wrightson Finance's interim results.
The company posted a profit for the six months to December 31 last year of NZ$1.3 million, down from NZ$3.3 million in the same period of 2009 as its credit impairment provision rose almost threefold.
Darrow said the jobs cuts included a mixture of field and office roles.
"We found we were probably a bit heavy in staff for our activity levels so we reduced a little bit," said Darrow.
Net loans and receivables fell 11% in the six months to December to NZ$492 million, which PGG Wrightson Finance says reflects a deliberate strategy to downsize its exposure to the lower margin term loans in favour of higher yielding seasonal finance. Darrow expects the trend to continue.
"Liquidity is the name of the game these days and we've just got to make sure our assets are sized right and they're getting a good yield so it's just an ongoing process of reshaping the balance sheet," said Darrow.
"We're happy with the progress to date."
The company, which is covered by the extended Crown retail deposit guarantee scheme until December 31, has been experiencing deposit reinvestment rates of about 80% versus a three year average of about 77%. The interim report notes "the majority" of new investors are investing on a non-guaranteed basis. Asked for a specific percentage of non-Crown guaranteed deposits, Darrow said this was commercially sensitive and declined to give one.
"But I can say we're happy with progress and we're ahead of our own targets and quite heartened by people showing positive confidence."
Darrow, who has openly criticised the distortionary impact of the Crown guarantee schemes, said quitting the guarantee was a two year transition that PGG Wrightson Finance was now 14 months through.
"We're on track and generally happy with how we're tracking," said Darrow. "It'll be nice to get through to the other side and get back to some normality."
PGG Wrightson Finance had NZ$260.4 million worth of debentures on issue at December 31, up from NZ$247.6 million at June 30 with NZ$168.7 million due for repayment within a year. The company also has bonds with a face value of NZ$94.4 million on issue due to mature on October 8 this year, and NZ$100 million in undrawn bank loans with BNZ and Commonwealth Bank of Australia which expires on December 1, 2013.
Meanwhile, Darrow said the uncertainty around the future ownership of parent PGG Wrightson, didn't appear to be impacting PGG Wrightson Finance.
"If it was having an impact we'd see it in the reinvestment rates and they're maintaining that good level so (there's) nothing obvious," he said.
Chinese seed and agricultural research firm Agria Corporation is bidding for control of PGG Wrightson and Zuellig Group, another Chinese firm, has expressed interest in taking a stake.
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