Profits at farmer owned plc top €50m

By Liam O'Neill

Farmer Business Developments plc has returned an after tax profit of €52.4m last year, but its results were affected by adverse movements in the share price of FBD Holdings plc.

The company, which has 4,400 farmer shareholders, was involved in establishing the FBD insurance company in the early seventies.

The company paid €2.7m in dividends last year, which was substantially down on the €15.2m paid out in 2006- though this fund distribution two years ago included a special once-off shareholder dividend of €13.7m. If this special payment is excluded, the latest shareholder returns were up 88% year on year. The fluctuations in the price of its FBD Holdings plc shares over the past two years has caused exceptional swings in the value of its investments in the insurance company.

Its FBD shares showed an unrealised loss of €136.9m last year, compared to a €39.6m unrealised profit in the previous year, leaving Farmer Business Developments plc with an overall retained loss of €84.5m in 2007.

However, during the year, the company benefited to the tune of €49.1m from its 25.68% shareholding in FBD Holdings plc and it received an additional €5.3m in dividends from other investments, up from €2.7m in 2006.

Cash balances stood at €123.2m at the end of 2007. The board has started to invest this substantial cash in capital appreciative assets. Some €26.8m of this reserve was invested last year and similar investments are planned in the current year.

Administrative costs at the company came out at €771,000 last year - a decrease of 0.6%, while shareholders' funds fell by 20% to €369.6m. The annual report highlights the exposure of the company to the financial fortunes of FBD insurance with the insurance company's stock accounting for 59% of its net assets last year. This reliance on one single stock is down from 77% in 2006. Therefore, the strategy of investing surplus funds in other capital appreciative investments would seem good.

Given the credit crunch, the company is ideally placed to take advantage of the situation and depending on the level of risk/reward they are willing to take, there are significant opportunities, which they could invest in.

The Board of Farmer Business Developments plc is large given its level of activity.

In addition, if the strategy of the company in the future is to make strategic investments outside of FBD holdings plc, its board could benefit from some directors with experience in this area.

A start to this process was made last year with the appointment of Pat Kenny, former managing partner of Deloitte, on a consultancy basis to assist the Board on investment matters.

Table 1: Farmer Business Developments plc financial highlights & ratios

	2007	2006	% change
	€m	€m
Turnover	54,352	172,960	-69%
Profit after tax	52,413	171,673	-69%
Unrealised loss/gain	-136,938	39,588
Retained loss/profit for year	-84,525	211,261
Financial assets	218,047	354,985	-39%
Shareholders funds	369,563	462,224	-20%
Dividend per ordinary share (cent)	5.6	4.7	19%