Thursday 13 April 2017 by FIIG Research ripples_on_water Company updates

StockCo 1H17 results – Strong growth offset by higher than expected costs

Agricultural financier StockCo achieved above budget loan book growth

While gross yields were steady, higher than budgeted funding costs impacted 1H17. The higher cost funding has now been repaid.

Figure 1
Source: Company reports

StockCo experienced strong growth in its livestock finance book, as shown in Figure 1, which increased from $73m at 30 June 2016 to $140m as at the end of December 2016. Given the continued strong growth in the book, StockCo has increased its livestock finance book budget as illustrated in Figure 2.  The growth was due to an enhanced distribution network via the Elders partnership, aided by favourable weather and strong livestock prices.  

Figure 2
Source: Company reports

The 1H17 results are summarised in Figure 3 along with our forecasts. The company was incorporated on 17 March 2015 and the FY16 financial statements cover the period from this date up to 30 June 2016. As such, there are no half year comparatives. 

Figure 3
Source: Company reports. * FIIG forecasts

Key points:

  • Gross yields on the book are in line with StockCo’s forecasts (actual year to date December 2016 yield of 15.6% versus a forecast of 15.5%).  The better than budget book size and yield mean that total revenue of $8.3m is above StockCo’s budget of $8.06m for 1H17
  • StockCo’s cost of funds will be higher than forecast in FY17 due to the inclusion of some higher cost senior debt funding. While it was anticipated that this funding would have been repaid early in the financial year, this debt was not repaid until March 2017
  • To date, the group has not recorded bad debt write offs nor made specific provisions. However, the group has started making a monthly general provision at a rate of 0.25%pa of the month end finance book balance
  • The StockCo AgriCapital senior debt club currently has $114m of capacity. StockCo states this is sufficient to meet the increased forecast growth to June 2017
  • Cyclone Debbie – this was mostly a coastal weather event. StockCo has few clients directly impacted, and reported no stock losses from any of its clients. Further, StockCo stated there was widespread heavy rainfall up to about 300km inland where StockCo has many clients. It advises that such clients tend to grow good pastures off the back of large rain events, which should create further demand for funding.

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