Sanford Limited (NS) Analysis

Overview

The company's origins go back to the 1880s and in 1904 Albert Sanford incorporated Sanford Ltd. The group's resources are committed almost entirely to the inshore and deep-water fisheries of NZ, and allied operations of coolstores, shipbuilding, engineering and aquaculture.

The company has also become involved in joint venture operations with Japanese, Taiwanese and Korean interests, and in overseas operations following acquisitions in Chile (1994 - closed 1997), Namibia (1996) and Australia. Its fishing fleet includes inshore vessels specialising in longline and trawl snapper for Asian customers, deep water freezer vessels, mid-water trawlers, ice vessels, specialised vessels for scampi fishing and purse seining, and deep water longline operations. Initiatives included joint participation in a bid to acquire Brierley Investments' 50% stake in NZ seafood processor Sealord Products, and acquisition of a strategic stake (approximately 14.8%) in Canadian seafood processor FPI.

In December 2002 it announced a change of balance date from 31 August to 30 September to coincide with the end of the fishing quota year.

In September 2004 it acquired a 25% stake in Chinese seafood processing company Weihai Dong Won Food Co Ltd and in October 2004 it bought the NZ fishing business and assets (apart from the scampi quota) of Simunovich Fisheries Ltd.

On 1 December 2010 Sanford acquired the Greenshell mussel and Pacific oyster businesses from Pacifica Seafoods for $85 million.

SAN has been granted Listing with a 'Non-Standard' (NS) designation. This designation has been granted due to a waiver from NZX Main Board Listing Rule 11.1.6 and an approval under Rule 11.1.5 that allow SAN to incorporate provisions in its constitution that enable SAN to monitor the aggregate holding of SAN's securities by Overseas Persons and to maintain it at a level below approximately 22.5%. This is a key aspect of SAN's ability to reduce the risk of SAN being required to forfeit its fishing quota under the provisions of the Fisheries Act 1996 by virtue of SAN becoming an "Overseas Person" without prior consent being obtained under the Overseas Investment Act 2005 (something which SAN would otherwise have very limited ability to control).

Specifically, the provisions in SAN's constitution grant SAN's board the power to:

• require information from a security holder or proposed transferee of SAN's securities;
• restrict a transfer of securities in certain circumstances, including where registration of that transfer would cause SAN to Breach the Overseas Ownership Threshold (as defined in the Fourth Schedule of SAN's constitution);
• suspend the voting rights attaching to securities that SAN's Board determines are Affected Shares (as defined in the Fourth Schedule of SAN's constitution); and
• require a security holder to sell, or to sell on behalf of a security holder, any securities that SAN's Board determines are Affected Shares (as defined in the Fourth Schedule of SAN's constitution) to non-overseas persons.

For further information, please see a copy of the waiver and approval decision under Documents on SAN's homepage on nzx.com.

Performance

The following information was extracted from Sanford Limited's full year results, released on 15 November 2024:

Sanford delivers an improved full year result

Summary:

• Revenue of $582.9m, up 5% on the prior comparative period (pcp).
• Adjusted EBIT of $74.2m, a record, and up 50% on pcp.
• EBIT of $54.3m, up 75% on pcp.
• Net Profit after Tax (NPAT) of $19.7m, up 96% on pcp. Improved NPAT achieved after

incurring $19.9m of adjustments and a non-cash tax expense required after a New Zealand

tax legislation change removing the ability to claim tax deductions on buildings.

• Operating cashflow of $73.0m, a record, and up 78% on pcp.
• Net debt of $185.5m, down 5% on pcp.
• Final dividend of 5.0 cents per share (cps) fully imputed, taking the full year FY24 dividend to

10.0c per share.

Sanford’s Managing Director, David Mair, said “Sanford’s financial result represents a record adjusted EBIT profit – one we have achieved despite challenging global economic conditions. The FY24 net profit after tax (NPAT) was $19.7 million, a 96% improvement on last year’s result. Operating cash flow of $73.0 million is $31.9 million (+78%) increase over the prior period, an exceptionally good result. A 5% increase in overall revenue, combined with a team focus on selling through aged inventory (orange roughy) and a concerted effort to expedite cash collection, positively led to cash flow improvements”.

An adjusted EBIT of $74.2m is a result of improved performances from all divisions. Demand and pricing have remained strong for most products and species throughout the year and margins have improved.

Export markets have been simplified, with consolidation in some channels resulting in reduced distribution costs. There has been a focus on lowering overhead costs throughout the year and accompanied with channel simplification, we are seeing costs reduce.

FY24 has not been burdened with the high cost of the Sancore ERP system change which was a large and complicated replacement of Sanford’s core operational and financial systems. The system is now business as usual as we attempt to extract the benefits from such a large investment.

Capital expenditure at $45.6m for FY24 is a 31% reduction on FY23. Most of this spend is related to wildcatch maintaining an aging fleet and making progress payments on the new scampi vessel.

The balance sheet was strengthened with net debt at $185.5m, down 5% on FY24 which is a result of the improved financial performance, increased operational cashflows and reduced capital expenditure.