Hot on the heels of its $14.1 million management shake up to strip out excess costs, Ruralco has set itself a busy agenda to make up ground after reporting a 70 per cent net profit slump this week.
The farm services group is to launch a new generic line of drench and lice treatments under the Covine brand by mid-2017 following this year’s successful private label release of the Relyon farm chemical range to Ruralco’s merchandise and agency network.
It has also teamed up with the ASX-listed Steadfast group to merge its insurance broking business into a joint venture with Ausure Consolidated Brokers (ACB), more than doubling its insurance footprint and giving itself better back office support and underwriting capabilities.
In Tasmania Ruralco’s agency subsidiary, Roberts is set to absorb the TP Jones and Company rural retail businesses in Launceston, Longford, Latrobe and Campbell Town in February, and sell its Kubota and Agco machinery dealership, Tasmania Farm Equipment, in Devonport, Launceston, Smithton and Hobart.
Ruralco is also bedding down the recent purchase of three new additions to its Total Eden water equipment stable in the NSW Lower Hunter Valley (Hunter Irrigation) and two in South Australia’s Riverland.
They are part of 19 new business locations added to the network in the past year.
Ruralco, the parent agribusiness for a host of rural livestock and property agencies, plus the 38-branch Total Eden network and merchandise group Combined Rural Traders (CRT), has 270 business outlets Australia-wide, many owned in partnership with their operators.
However, tight margins in the livestock export business and the cancellation an export licence for its southern Frontier International operation in July became the trigger for a big cost cutting drive and management revamp across the business.
Live export and water business restructuring alone cost the company more than $8 million, with redundancies, six store closures and the divestment of the machinery business costing a further $4.4m.
The restructure, and an $8.7m slide in live export gross profits, eroded Ruralco’s 2015-16 after-tax net profit to just $4.2m.
Although the rural agency and water services group posted strong results in its core traditional business, with rural supplies gross profits up 16pc to $118m and agency gross profits up 3pc to $105m, the company has spent $14m on restructuring and divestment costs.
Managing director, Travis Dillon, has not released estimates on the value of the cost savings to Ruralco’s bottom line, but the “strategic cost out benefits will more than cover the expenses we’ve incurred”.
“We’ve taken action which needed to be taken; we’ve got a very engaged workforce; we’re very comfortable with our platform, and we’re very optimistic about the business outlook for the next six months,” he said.
Despite the lean 2015-16 net profit result, the company’s underlying performance was solid with revenue up 10pc to $1.8 billion and gross profit lifting from last year’s $297.7m to $304.9m.
Shareholders will receive a two cents a share fully-franked dividend taking the total for the year to 10c/share – down from 16c last year.
Meanwhile, Mr Dillon has won widespread applause from mental health advocates and his farm sector peers for donating all his $140,000 salary bonus to the charity Lifeline Australia charity as part of a personal effort to prevent rural suicide.
Ruralco is already a keen supporter of Lifeline, with staff across the company raising funds for its rural telephone counselling support network.
Lifeline chairman, John Brogden, said Mr Dillon set a wonderful example for other company bosses and the lifesaving difference they could make.
“As far as I’m aware, this is the first time an Australian CEO has proactively donated their full cash bonus, let alone in such a wholehearted and pragmatic way,” he said.
The funds would help Lifeline answer 5500 additional crisis calls and help ensure that no suicidal person had to be alone.
Mr Brogden has strongly urged Mr Dillon to talk about his donation publically, not just because of the example it set around CEO incentives, but because of the positive community impact it could have.
Mr Dillon said it wasn’t his job to tell other executives how to spend their money, but his company regarded rural Australia’s high suicide rate – double that of metropolitan areas – as a big community issue.
“It’s a chance for me to show a bit of leadership support for the efforts others have already made,” he said.
“I’ve still got a big mortgage, like a lot of other people, but I don’t think it will hurt if I contribute to the fundraising momentum which has been building at Ruralco.”