Ferret's Stock to Watch: RURALCO HOLDING LIMITED 07:27,...

Ferret's Stock to Watch: RURALCO HOLDING LIMITED
07:27, Wednesday, 9 February 2005

A DIVERSIFIED RURAL COMPANY BEATS THE DROUGHT AND MORE

Sydney - Wednesday - February 9:(RWE Australian Business News)
********************************

OVERVIEW

Rural diversification has been the right strategy for Ruralco in
maintaining a continuing flow of profits even during the worst drought in
100 years.

Chairman of Ruralco Richard England told shareholders at the
recent annual meeting that the first quarter of the current year posted
improved results.

He said revenue was up 8 per cent and earnings before interest
and tax increased by more than 7 per cent.

"In the absence of unforeseen circumstances and given normal
weather patterns, we are anticipating net profit after tax for the six
months to 31 March 2005 to be about 30 per cent ahead of last year.

It was a different picture at the same time 12 months ago when Mr
England told the annual meeting that the company had just come through
the worst drought in 100 years which had hurt its main operations.

Despite this the company's diversified activities across the
nation cushioned the impact.

Ruralco operates about 400 stores covering rural merchandise,
real estate, and wool & livestock agency services.

The company trades under the names of CRT (Combined Rural
Traders), Town & Country and Grow andForce Australia.

In the year ended September 30, 2004 it was one of mixed fortunes
for the Group.

On the one hand net profit after tax was up 23 per cent to
$2,523,000 from $2,051,000 in 2003.

Turnover increased from $560 million in 2003 to $611 million for
the year, an increase of 9 per cent.

These increases were encouraging given the poor seasonal
conditions through most of the year.

The result was underpinned by another record result from Rural Merchandise.

On the other hand, the result was adversely impacted by the
failure of one of one of the operators in the group which necessitated
increasing provision for doubtful debts of about $800,000 and a one off
charge to recognise and cap future retirement allowances for eligible
directors of $135,000.

Meanwhile the overall result was enhanced by a strong
contribution from the Rodwells business, particularly in livestock and
real estate and from our Investment/Member Partner stores.

"In 2005, we will be looking for a much improved performance from
the Fertiliser business which was restructured during the year, including
the acquisition of Terra Firma Fertilisers and the negotiation of a new
deal with Incitec Pivot Limited," Mr England declared.

A feature of the new arrangement is that Ruralco will receive
commission on member sales and bring this to account as revenue, instead
of bringing to account gross revenue from sales of fertiliser to members.

"IPL will be responsible for all member inventory and debtor
arrangements, releasing working capital from the Fertiliser Pillar
for the development of other parts of our business.

"We will also be looking for improvement from our Corporate
Stores in Queensland, which have experienced particularly adverse trading
conditions as a result of the drought and the sugar industry problems in
that State.

"Our Real Estate Pillar has under performed and management is
actively pursuing strategies to turn this business around.

"Your board and management team remain committed to a strong
independent member focus and will continue to selectively explore
opportunities for expansion into new market segments that complement our
current offerings and are capable of generating returns in excess of our
hurdle rate of return of 15 per cent after tax on funds
employed, the chairman told shareholders.

SHARE PRICE MOVEMENTS
*********************

Shares of Ruralco yesterday sold steady at $4.30. Rolling hear
high has been $4.30 and low $3.65. Dividend is 15c a share to yield 3.49
per cent. Ferret drew investors attention to Ruralco a year ago when the
shares stood at $3.80

Shareholders were told at the annual meeting that the board had
engaged Pitt Capital Partners to assist the company with a strategic
review of the company.

The first stage of this review has been completed and the
consultants are assisting the company to evaluate the options in its
targeted areas of interest and focus.

One of the management's initiatives has been to analyse how
Ruralco might best participate in the growing companion animal market.

A number of potential acquisitions have been canvassed, but Ruralco
is yet to find the right strategic fit.

Howevewr, the company has established the concept known as
PetXtra which has the potential to develop into another pillar.

Another of management's initiatives has been to join with Suncorp
Metway to develop a livestock funding mechanism to assist existing and
new members who are involved in the livestock industry.

Ruralco expects to roll out this product within the
next quarter.

BACKGROUND
**********

Ruralco is Australia's largest network of independent member
groups servicing rural Australia.

Corporate strategy is centred on our Five Pillars of Diversity
which incorporates member groups for rural merchandise, fertilisers, real
estate and wool & livestock together with a strategic investment program
for key store locations.

The rural merchandising group has over 400 members across the
nation operating under the CRT and Town & Country brands.

These outlets supply a wide range of products and services for a
variety of market segments including crop protection, animal nutrition
and production, fencing, seed and horticulture.

The CRT brand is the most recognised brand in rural Australia and
its positioning as 'Your Local Bloke' reinforces the independent nature
of members and their commitment to local communities.

Grow Force Fertilisers boasts over 160 members and supplies a
complete range of fertilisers from bulk solids, solubles and organics for
farmers through to home and garden products for the domestic market.

With over 70 per cent of fertilisers sold through independent
outlets there is the potential for Grow Force to become a major player
within the Australian market.

In the second half of 2003 the group launched CRT Real Estate
which has very quickly grown to incorporate some 35 members in
Queensland, NSW, Victoria and WA.

The aim is to create the leading independent real estate group
servicing rural Australia and a solid foundation has been set for
achieving this objective.

A CRT Livestock and Wool initiative is currently under
development and is planned for launch in the latter part of 2004.

Some 60 per cent of livestock is traded through independent
agents and the wool and livestock member program is aimed at providing
additional financial resources that will assist agents to grow
individually whilst being able to market their services collectively
under the CRT banner.

The strategic investment program is designed to enable the group
to take a significant shareholding in stores that are located in key
regional centres and which have a significant market position.

The optimum position for the group is to have these businesses
managed by independent operators who are part of Ruralcor Member Partner
Program.

Ruralco has enjoyed significant growth in recent years and the
continuing success of the group demonstrates its ability to meet the
changing needs of an ever-challenging rural marketplace.

ENDS