Farmlands achieves growth in tricky conditions

Farmlands achieves growth in tricky trading conditions

FOR IMMEDIATE RELEASE
12 October 2010

Rural retailing cooperative Farmlands Trading Society has outclassed its rivals, notching up impressive annual financial results in what its Chief Executive said was one of the toughest business environments since the mid-1980s.

Farmlands posted an annual turnover of $561 million in the last financial year, an increase of 6 per cent over the previous year. It also distributed $36.1 million of trading and loyalty rebates to members, an increase of 3.5 per cent over the previous year.

Chief Executive Peter Ellis says Farmlands has continued to invest significantly in the business to support that growth, but profitability at $3.5 million was impacted by the competitive market, and an increased provision for bad debts reflecting the strained cash flow of some shareholders.

“We think these annual results are very credible considering the problems facing the primary sector in the past 18 months,” Mr Ellis says.

The business has grown organically and through expanding its store network to a total of 41 North Island stores. On a same-store basis, the business grew 2 per cent year-on-year, and including new stores opened, growth in the retail business was 10 per cent year-on-year.

Mr Ellis believes this growth is unique among Farmlands’ major competitors in the industry.

Farmlands sought to increase its scale and market share over the past two years to reduce farm input costs to its shareholding members. Mr Ellis estimates its market share grew up to 5 per cent in the last financial year to about 23 per cent of the rural merchandise market in the North Island.

The number of Farmlands shareholders also increased by 1060 in the last financial year to 25,700.

Underpinning the growth has been a focus on core merchandise activities through existing and new stores.
During the year Farmlands opened stores in new locations in New Plymouth, Hautapu, Kaitaia, Taihape and Waipapa.
And following its acquisition of Skeltons horticultural specialists in 2008, this year Farmlands expanded its Skeltons horticultural offering in the Bay of Plenty, Northland and Pukekohe.
“We now have a presence with technical advice and the requisite products at competitive prices in the major horticultural areas throughout the North Island,” Mr Ellis says.

Farmlands Card sales grew by 4 per cent, a slower rate than growth in the retail business, again reflecting hard times. But Mr Ellis says he believes the card is an unrecognised gem in Farmlands’ toolbox, offering shareholders great opportunities to access discounts with more than 3000 card partners throughout New Zealand.

As well as attracting discounts, card purchases may also qualify the shareholder for an annual loyalty rebate payout – and this year Farmlands paid out $3.2 million.
“We will increase our efforts to create awareness of those opportunities over the next year,” he says.
Mr Ellis acknowledged the valuable contribution of Farmlands’ staff to the company’s achievements in the challenging marketplace.

“We are a people business,” he says. “If we do not have passionate, motivated and focused staff, we do not have a business, and I am very lucky to have that in the more than 400 employees we have. They have worked immensely hard in the last year in difficult conditions to deliver the achievements we have had, particularly when our performance is compared with that of our competitors.”

The senior management team was bolstered during the year by the addition of Gavin Foulsham, General Manger of the Farmlands’ Card team and Steve Sturgess, Chief Information Officer, while Wayne Walden retired from the board after nearly three years’ service.

The year ahead will see Farmlands continue to build its position in rural merchandise in the expectation of industry consolidation, and create greater awareness among shareholders of the benefits of using their Farmlands Card.

Over the next 18 months, the company will grow its network to 50 stores. The next three new stores will be opening in Putaruru in December, in Opunake in January and in Kamo in June next year.

ends

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