Allied Farmers' first-half profit falls as it focuses on livestock services growth

Allied Farmers reported a 32% drop in first-half profit as income from its shrinking asset management services segment plunged while its livestock services segment increased sales.

Net profit fell to $615,000 in the six months ended December 31, from $907,000 a year earlier, the Hawera-based company said in a statement. Revenue rose 0.7% to $10.3 million.

"This is a strong operating result, benefiting from the livestock division's trading performance, and does not have the benefit of the corporate and asset management one-off gains that bolstered the group result for the corresponding six months period ended Dec. 31, 2014,"  chairman Garry Bluett said. "The directors now consider that the group is well placed to shift its primary focus to growth."

Livestock services saw net profit jump 78% to $1.03 million, while profit from asset management services, which houses the former Hanover and United Finance assets, dropped 80% to $120,000. The corporate and rural services segment widened its loss to $536,000, from $260,000 a year earlier.

Allied Farmers has said its focus is to build its livestock business. In December, it re-acquired 9% of New Zealand Farmers Livestock for $1 million, taking its total stake to 66%, after earlier in the year buying a 17% stake in Hawke's Bay-based Redshaw Livestock. Allied sold down its stake in NZFL in 2014 to enable it to help repay $2 million owed to Crown Asset Management following the failure of its Allied Nationwide Finance unit.

NZFL continued to perform ahead of expectations in the first half, with costs controlled and margins slightly higher despite livestock sales slowing on lower dairy livestock values, Mr Bluett said. Returns from Redshaw livestock were in line with expectations.

"Given that NZFL is overwhelmingly the company's most significant asset, and following the successful acquisition of a shareholding in Redshaw Livestock, the company's strategic focus is on supporting NZFL in its exploration and execution of growth opportunities," Bluett said. "The Allied Farmers Group is currently actively exploring a number of these opportunities to grow the livestock business and further enhancements."

The shares last traded at 5c, and have fallen 2% so far this year.

(BusinessDesk)