Australian Agricultural Company Limited (AAC) Earnings Call Transcript & Summary

Thank you for standing by and welcome to the Australian Agricultural Company FY '20 Results Announcement. [Operator Instructions] There will be a presentation followed by a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to Mr. Hugh Killen, CEO. Please go ahead.

Good morning, and thanks for joining us to discuss AACo's Full Year Results for Financial Year 2020. I am Hugh Killen, AACo's Managing Director and CEO. And with me is our Chief Financial Officer, Nigel Simonsz. I will take Slide 2 as read, so we'll move straight on to Slide #3. I'm now going to take you through some of the highlights of our full year performance. I want to touch on our response to COVID-19 and potential disruption in our Chinese market. And I will report on progress against our strategy in FY '20, including performance across each of our key regions. I'll then hand over to Nigel to take us through the financials in more detail, and then I'll provide an update on our operating environment as we move into FY '21. So let's turn now to key highlights slide on Slide #4. I am pleased to report that our strong first half performance has continued throughout the full year. We have delivered a strong set of results in the face of some headwinds which became greater as the year wore on. And thankfully, the impacts from COVID-19 were negligible in FY '20. However, the impact on FY '21 results is obviously still uncertain. Continued rollout of our branded beef strategy has produced record wagyu sales for the year, up almost 20% compared to the previous year. Our continued focus on cost has helped return a healthy operating profit of $15.2 million. We've recorded our strongest positive operating cash flow results in the last 3 years. Our gains have been broad-based with double-digit sales growth across each of our major global regions. And we have achieved these outcomes while absorbing a further $42 million in drought-related costs in FY '20. In short, our branded beef strategy works. More broadly, our EBITDA result of $80.1 million represents a $263 million turnaround from the previous year. This is largely due to the year-on-year improvements in cattle market values, but it also reflects the underlying quality and value of our herd. We still have a long way to go towards making AACo a more streamlined and efficient organization. We continue to pursue a simpler supply chain, and we'll continue looking for opportunities to reduce costs. This is fundamental to achieving our branded beef strategy, and it helps position AACo to navigate an uncertain external operating environment in a number of important areas. On to Slide 5. I want to take a moment to address some of these uncertainties including COVID-19. As I noted on the previous slide, the impact of this pandemic has had an immaterial impact on our FY '20 results. And I'm proud to report that we acted early and decisively to protect our people, our communities and your company. This has included social distancing measures at our offices around the world, halting non-station staff and supply visits to our stations and reduced movement between our 26 stations, farms and feedlots. Our people adopted these changes quickly and effectively. And as a leader in the industry, we made all of our plans available to other producers as a good practice guide. We're able to work closely with the Northern Territory and Queensland governments to continue working across borders, with no disruption to our operations. And we engaged with some of our neighboring indigenous communities to coordinate with their efforts to protect against the virus. In addition to these personal safety measures, we immediately began identifying strategic commercial opportunities to pivot away from the worst impacts of the virus. We'll go through this work in more detail on the next slide in a moment. More recently, we have been confronting uncertainty created by the temporary suspension of 4 Australian beef processing plants by Chinese authorities. As we will discuss shortly, our meat sales are diversified across a wide range of markets around the world. We are continuing to deliver product into China. And we're able to use our established presence in different markets around the world to divert product as required. On Slide 6, we have a little more detail on our commercial response to the impacts of COVID-19. The major one of these impacts has been the slowdown in restaurant and food service customer channels around the world. As part of our branded beef strategy, AACo has always had an established presence in retail channels and partnerships across our major export markets. These represent approximately 40% to 50% of our existing meat sales. Now we've already seen positive demand growth in all of these retail markets. We are leveraging our distribution partnerships to increase retail supply to meet this demand. And this has included new activations for our Darling Downs Wagyu and non-branded wagyu product in supermarkets, butchers and online. I want to note the images on this slide are examples of some of our existing and new prepackaged products which we're delivering into our supermarket channels. These are particularly important given some emerging retail trends, which we'll discuss on the next slide, Slide #7. Many of the consumer trends listed here where evident prior to COVID-19, but the pandemic appears to be driving them quite strongly. First of all, it's important to point out that overall demand for beef is still very strong. In particular, we're seeing strong demand for safe, high-quality, packaged, imported meat particularly in Asia. This is driving demand in supermarkets. And we're also seeing strong demand for online ordering and noncontact delivery and payments. Each of these trends are useful in understanding the potential value of our prepackaged products included on the previous slide. And we are exploring direct-to-customer initiatives in key markets. This includes online platforms, an example, which is shown on this slide, from our U.S. market. Thankfully, our own production systems have been largely unimpacted. We continue to be able to produce and export quality products, and this is allowing us to take advantage of many of these trends as part of our pivot. I do want to point out that even with the strength of our retail customer channels, food service and restaurants are central to AACo's branded beef strategy. We have made strong progress in rolling out this strategy in FY '20, which I'll talk about in more detail shortly. These gains will be protected as we pivot towards greater retail supply. And we look forward to return to growth across all of our customer channels and regions as we move through the worst impacts of the pandemic. We now turn to Slide 9 and progress against our branded beef strategy in FY '20. At this point, I want to remind you that our meat sales program is 100% wagyu. This is important because in FY '20, we achieved our strongest ever wagyu meat sales, up 19.7% this year over last. This includes 155% increase in premium Westholme brand sales. Importantly, we've achieved this growth while protecting margin across the business with an 8% improvement in our price per kilo compared to last year. This reflects the quality of our product. It reflects the growing customer awareness of our brands in key markets. And it reflects continued strategic product allocation to premium markets, including Europe and the U.S. I'm pleased to report that this growth has been achieved across all of our major regions, including a 19% growth in Asia, a 17% growth in Europe and the Middle East, a 34% growth in North America and a 16% growth in Australia. Three key strategic pillars have underpinned our branded beef push. We've continued to drive the strongest possible partnerships with distributors across all of our major markets and regions. We've continued to manage costs and achieve operational improvements as we roll out a simpler and more efficient AACo. And we continue to invest in our people and leadership across the business and on the ground in our key markets. Now the focus for all of this work is our portfolio of leading brands, which we turn to now on Slide #10. In FY '20, we continue to strengthen our brand portfolio across our restaurant and retail channels. These brands have allowed us to connect with customers in the world's finest restaurants, through premium and gourmet butchers and through leading supermarkets. We sell some unbranded product into wholesale markets as a byproduct of our high-quality production systems. Continued growth in each of these brands helped position AACo across diverse and complementary customer channels. And this is particularly important given some of the uncertainties in the current economic climate, which I discussed earlier. Turning now to Slide 11. A major focus of our branded beef strategy in FY '20 has been our accelerated rollout of AACo's premium Westholme product. In FY '20, we launched Westholme into more than 20 key cities around the world. We also partnered Westholme with a number of chefs and fine dining institutions in FY '20. 6 months ago, I noted the 2 gold medals Westholme won in the World Steak Challenge in 2019. And I'm pleased to report that these efforts have produced real outcomes in FY '20. We've doubled global Westholme beef sales by volume compared to the previous year and with more than double Westholme revenues, growing these sales by 155%. These are significant gains, and they're at the heart of our branded beef strategy. And these results tell an important story about the progress we have made in the last year. On Slide 12, we move now to our performance by region. And I would make the point here again that our regional performance results in FY '20 are in no way an indication of FY '21 performance given the different operating environment that we're in. Over to the next group of slides, beginning with Asia. The Asian beef market reflects a very strong consumer focus on food safety, freshness and provenance. These are core to AACo's brand profile and our story. And in FY '20, this helped us consolidate and expand our brand presence in the region across both fine dining and retail. As a result of this work, we've achieved a 19% growth in sales compared to the previous year. And Asia represents 66% of AACo's total sales in FY '20. We've continued to drive premium brand engagement in the fine dining sector, including through strong distribution partnerships in Hong Kong, in Singapore and also in Thailand. Our retail presence in leading supermarkets continues to grow. We have an established base in South Korea. And we have expanded our retail presence in FY '20 into other markets in Asia. On this next slide, I want to take a slightly deeper dive into some of our key Asian markets in South Korea, in China, Hong Kong and Taiwan. South Korea is the fourth largest economy in Asia, and it is a key market for AACo. We enjoy long-established business and retail relationships going back more than 15 years. Darling Downs Wagyu is a household brand name in South Korea, and it is available in supermarkets across the entire country. And we support this brand presence through a large number of point-of-sale and in-store promotions and demonstrations. In China, in FY '20, we continue to deepen our partnerships and broaden our customer base. I note that the incidence of African swine fever in FY '20 drove Chinese demand for safe alternative protein sources, which positively impacted our progress there. As I mentioned earlier regarding the recent suspension of Australian processing facilities, we are continuing to export some product to China and diverting the rest to our other markets as required. AACo's Hong Kong presence is driven predominantly by the strength of our distribution partnerships across both food service and retail channels. The strength of our retail presence has helped protect AACo from some of the worst effects of disruption in that market over FY '20 like the political unrest and COVID-19. Now we've been in Taiwan for the last 5 years. Our market focus is on high marble-score product and high-end customers. We've successfully launched Westholme in fine dining restaurants, supported by trade activation activities and some retail presence, and this continues to be a strong market for us. Moving now to the North American region on Slide #15. As I reported in our half year results, we've been focusing on rebuilding our business, our brand presence and our distribution partnerships in the U.S. I am very pleased to report a 34% growth in wagyu sales in FY '20 in the region. And this has brought North America up to 7% of our overall wagyu sales. This growth is no accident. Our dedicated team on the ground has been in place for much of FY '20. We've been focusing on key major markets, including product launches and distribution partnerships in Los Angeles, San Francisco, Las Vegas, Washington, Miami, Chicago and also in New York. Across the wider U.S. and Canada, we're seeing growing retail presence, including direct to consumer, as you saw earlier in the Goldbelly reference on Slide #7, in gourmet butchers and some large supermarket partners. And we continue to explore these opportunities. Moving now to Europe and the Middle East on Slide 16. This region has seen good growth in FY '20. Sales increased 17% compared to the previous year, and the region was responsible for 12% of our overall sales for the period. In FY '20, we continued restructuring our distribution partnerships in the EU as we work closely with our distribution partner based in Europe. We've also driven product launches and training for chefs in the U.K. The Middle East performed strongly in FY '20 following last year's brand launches. But as a global tourism hub, it is currently impacted by COVID-19. And we've also continued to expand our retail presence into other Gulf countries. On Slide 17, you can see that our efforts to restructure and refocus our branded beef business in Australia have borne fruit. We've achieved a 16% sales growth at home. And Australia has made up 15% of overall wagyu sales in FY '20. Importantly, our premium branded product shift has produced stronger prices with lower volumes. Now this reflects our focus on improving the overall quality of our products sold. And this has been supported by strategic redirection of product to higher-value export markets. We successfully launched Westholme in Sydney, in Melbourne and also in Brisbane in FY '20. And this work has been underpinned by the revitalization of our key Australian distribution partnerships. I will now hand over to our CFO, Nigel Simonsz, who will take you through the financial details.

Thanks, Hugh, and good morning, everyone, and thank you for your interest in what has been a solid financial year results for AACo. I will now take you through the financial highlights and provide some additional context. And moving to Slide 19, I'm very pleased to report a healthy operating profit and cash flow result for AACo in FY '20. This reflects the good momentum we built in the first half of the year, which has continued in the second half. As Hugh referred to earlier, we reported a positive operating profit result of $15.2 million in FY '20. The second half of the year delivered an incremental $8.9 million in operating profit and $9.1 million in operating cash flow, building on the positive results we reported at the half year. I would also like to note that we have delivered our strongest operating cash flow result in 3 years. And we have delivered positive operating cash flow in 4 out of the last 5 halves. These results have been driven by strong gains across meat sales in FY '20. Our wagyu revenue is up nearly 20% compared to the previous year. And in particular, our price per kilo has strengthened 8% on the previous year. These results reflect our continue -- also reflect our continued discipline on costs across the business and our progress in moving to a simpler and more efficient AACo. Our net assets have also increased by over 8% to circa $913 million. This result reflects an increase of approximately 9% in the value of our world-class property portfolio as well as increases in livestock values year-on-year. Our gearing ratio, excluding the impact of the adoption of AASB 16, has also decreased from 30% to 28.8% on a like-for-like basis. And now moving to Slide 20, our profit and loss summary. As mentioned previously, underlying operating profit finished the year at $15.2 million, which was down on the previous year's underlying results of $23.7 million. The positive current year result includes the impact from absorbing approximately $42 million in elevated drought-related costs in FY '20 as well as the impact on inventory of our decision to strategically destock in response to these tough conditions. I'd also like to point out that the prior year results also included one-off revenues from the wind down of Livingstone and 1824 supply chains. As referred to earlier, our operating profit result is a direct reflection of the continued rollout of our branded beef strategy and a continued focus on controllable costs. This has delivered close to 20% growth in wagyu meat sales driven by both positive volume and pricing experiences. And this outcome is underpinned by a reduction in operating expenditure year-on-year of approximately $31 million as we keep moving towards a simpler and more efficient business. As Hugh mentioned earlier, our statutory EBITDA also finished at a profit of $80.1 million compared to a loss of $182.7 million in the prior year, a $262.8 million improvement. The current year result is buoyed by $102 million reversal of the prior year's $94 million unrealized loss which resulted from a decline in the livestock market in the prior year. The prior year also featured a $65.5 million decline in lower value composite numbers from heightened sales resulting from Livingstone and 1824 decisions as well as the $45.6 million in Gulf flood write-offs that we reported previously. And now moving to Slide 21 and our balance sheet. I am pleased to report that we have ended FY '20 with a stronger balance sheet. Our net assets position has improved 8% over the year, and this includes strong growth in the value of our land assets. And closing herd value for the year have improved nearly $50 million compared to the previous year. And this includes the improvement in the market value of our livestock across both wagyu and non-wagyu animals. And this has offset the impact of a decline in wagyu and non-wagyu herd numbers as we complete our strategic destocking. I would like to point out that our AACo strategic destocking has been driven by both our focus on moving to a simpler and more efficient business and by seasonal factors over the past couple of years. And in FY '20, as stated previously, we absorbed around $42 million in additional costs for feed and transport related to drought conditions. Strategic destocking helped contain this number. Gulf flood losses and drought conditions have also impacted on branding levels during the year, contributing to lower herd numbers at the close of FY '20. And as we've reduced our herd size, we have deliberately protected our breeding herd. And this work should also be understood in the context of our continued efforts to control costs and the move to a simpler and more efficient business, as referred to earlier. And as announced in February, we were able to successfully secure an additional $50 million of borrowing capacity. This ensures that we are well capitalized and able to respond to future adverse seasonal and economic conditions. And I'm also pleased to report that we maintain comfortable headroom under our banking covenants. And as mentioned earlier as well, our gearing ratio has also positively improved on a like-for-like basis from 30% to 28.8%, excluding the adoption impact of AASB 16. And now moving to Slide 22, we can look at our cash flow in more detail. And as mentioned earlier, FY '20 operating cash flow was our strongest result in 3 years at $20.1 million, up from $13 million the previous year. This reflects the combination of factors, including the continued rollout of our commercial strategy and discipline on costs across the business. And I note again that this result has been achieved despite significant drought-related impacts in the year. The prior year result also included the one-off cash flow inflow benefits from the wind-down of Livingstone and 1824 supply chains. And with that, I'll now hand back to Hugh to talk about AACo's operating environment.

Thanks, Nigel. As many of you know, we've been taking a more structured approach to articulating and measuring our sustainability work across the business. We'll be releasing our first sustainability report ahead of our AGM, and I'm pleased to report some of the important work we've been doing in FY '20. AACo is taking every opportunity to apply a sustainability lens across all of our operations. And this includes driving positive impact on our people, our livestock, our country and the communities which we are part of. As you can see from this slide, we've integrated sustainable practices into our everyday tasks and operations right across the company. We're providing 47 traineeships for young Australians to support the regional and rural communities we operate in. Our commitment to animal welfare exceeds best practice across every one of our day-to-day operations. And this includes mandating pain relief in 100% of potentially painful surgical procedures on our livestock. And we're making strides towards clean energy, including converting 15% of our bores to solar power, with many more to come. On the next slide, Slide 25, you can see that longer term, we're pursuing a suite of important sustainability changes. We continue to develop science-based measures to address enteric emissions. We are working to limit road transport where possible as we reset our supply chains. And we have a company-wide focus on improved waste management within the business as well as more sustainable packaging for our products. Each of these measures make sense in their own right. Taken together, they are vital to telling a story to our community and our consumers. And they make a stronger and more -- make us a stronger and more sustainable business for the long term. Moving on to Slide 26. I want to make the point again that COVID-19 places us in an inherently uncertain operating environment. We continue to monitor the economic effects of government safety measures across all of our markets, and we continue to work across our business to pivot away from the impacts of the pandemic and towards new opportunities in areas of growing demand. However, the dynamic nature of these unprecedented circumstances make it impossible to estimate the full impact of COVID-19 on AACo. In the meantime, Rabobank has brought together some useful analysis on the ongoing impact of COVID-19 and beyond. Based on their data, Rabobank notes that U.S. food service sales took 18 months to recover following the GFC. Now having said that, Australia is relatively well positioned to weather this storm. Lower national herd numbers and good seasonal conditions are a positive. The lower dollar and disruption to our competitors will help. And African swine fever will continue to impact protein supply, benefiting alternative sources such as Australian beef. It is worth noting that national herd numbers are likely to be down around 20% in the coming year from their peak. This is in line with AACo's decision to strategically destock at a similar level. On the next slide, you can see Rabobank and ABS data on slaughter rates and meat production. Rain and restocking will impact slaughter rates, and this is likely to reduce Australian beef exports by as much as 18%. COVID-19 and its impacts mean we're moving through a period of great uncertainty. But this data provides some insight into how these impacts may play out in our future operating environment. Moving to Slide 28. This uncertainty notwithstanding, AACo continues to offer a unique value proposition. We have a proven ability to produce the highest quality beef at scale. We secure a premium for our products around the world because it is so good, because it comes from a special place and because it's produced by remarkable people. Consumers today want to know more than ever about the safety, source and the provenance of their food. At AACo, we've put a lot of time and effort into breeding exceptional genetics to produce the best beef in the world at scale. Our brands have positioned us to capture the global appetite for high-quality Australian products which comes from clean farming practices and pure sources of feeds. Our history and our story let each customer feel confident in us and in our product. And our brands capture this connection, making it stronger over time. We're continuing to build the company and the leadership team to capture this opportunity. We've been going strong for 196 years through drought, flood, war, financial crises and global pandemics, and we'll continue to grow your AACo for the future. This ends the formal part of our presentation. I'd like to thank you all for your time in joining the call today. And Nigel and I are happy to take any questions.

[Operator Instructions] Your first question comes from Jonathan Snape with Bell Potter Securities.

Can you hear me okay?

Yes, I can, Jon.

Just a couple of questions, if I can. Just first of all, around the drought-related costs. I'm just trying to get an idea, is that a year-on-year uplift? Because I think in the first half, you had a number of $36 million and $42 million for the full year kind of suggested came back a long way. But I'm trying to figure out if I should be adding that $6 million to last year's $35 million impact and so the total impact of the drought has cumulatively been kind of $40 million in the half. Is that the way I should think about it? Or is that -- did it come down a lot in the second half?

Yes, Jon, you're right. It come down a lot in the second half is the way to think about it. Nigel, do you want to give some more context there? Or...

Yes, no problems. Thank you. Yes, the full year number we reported last year, Jon, that was roughly $60 million in terms of elevated drought-related costs in comparison to the $42 million this year. And yes, you're right, as you mentioned, it did come off quite materially in the second half of the year.

Yes. But I guess what I'm trying to figure out is that $42 million, is that year-on-year? Or is that just relative to, I guess, your standard cost modeling?

Yes, that's an absolute number, Jon, based on costs, we believe, are elevated above an average season.

Okay. So it takes into account feed, nutritional, that kind of stuff.

Yes, it does.

All right. And just to clarify something else, was $5.8 million cost in that operating EBITDA number for Livingstone, is that correct? And should I be thinking that's going to stick around for a while longer?

Yes, Jon, that number is correct. I think in terms of Livingstone, Jon, what we're looking to is contain all the costs that we can in that entity while it's in a suspended state. And we will be working through ensuring that happens and then looking for options around the plant over the next little while.

And Jon, just to add to that, the -- if you'll see this in the segment note relating to Livingstone, it's approximately $4 million thereabouts roughly related to Livingstone itself. And the rest of that number is corporate and other related costs related to Livingstone.

Okay. That's fine. And just one last one on the valuation of the property, look, I noticed that adult equivalent on the properties didn't kind of lift, so it was all a movement in the value per AE. Is that just a reflection of the market movements more than anything else in terms of the put-through in the balance sheet for that?

Yes, Jon. I think that absolutely is reflective. Obviously, we've been -- we invest in our infrastructure and our properties as well. I think that's reflected in the valuations there as well.

[Operator Instructions] Your next question comes from Paul Jensz with PAC Partners.

Just initially, just trying to match the -- I suppose your commentary in the presentation with the 4D, in particular, the geographic revenue improvements there across U.S.A., North America and Australia. So it looks like we're down in the 4Ds in the meat revenues or meat sales revenues, but you talk about them being up in the presentation. So can you just talk through the differences there, please?

Yes. I'll give some overarching context and then Nigel can hop into the detail on the 4D. What you're seeing there is we're talking about our wagyu meat sales in the deck and the PCP comparison is the fact that we had meat sales related to Livingstone Beef and 1824 in the prior year. So when you normalize for those programs that don't exist in the FY '20 year, that's the positive increase we've seen in our numbers. Nigel, is there any further detail you'd like to give?

No, that's the rationale or reason for that, Hugh. So last year, Paul -- yes, last year, Paul, NABL or Livingstone sales represented approximately, in meat sales, $31 million, and 1824 meat sales represented $20 million. So as you pointed out, the investor presentation relates to wagyu meat sales.

Right. It's just a little bit confusing, but I'll work through that. Just with the Australian...

Sorry, hopefully, it's not too confusing. Their supply chains that ceased, that had an impact on our performance in FY '19, for a part of FY '19, which is why the revenue comes through. Both the 1824 supply chain and Livingstone Beef have been closed for a while now. It was just the clearing of inventory that was within our business last year that's flowing through. So comparatively, this year, it's not flowing through.

Yes. And Paul, just to help with that, last year's meat sales represented $246.3 million. There's a -- we have discontinued operations from Livingstone of $31 million, discontinued 1824 meat sales of $20 million, and then wagyu meat sales have increased $34.8 million to get the number to the $229.6 million.

Okay. I can work through that. And just on the -- maybe back to Hugh on the -- I suppose, the food service side being impacted this year. And I suppose, are there any modifications? I think you're stridently saying that the strategy is still on track on the branded side. But are there any short-term modifications you're going to make with the food service being slow to recover in the next 18 to 24 months?

So what I'm saying around brand is that we'll protect brand as the first order of priority. And I believe that in this environment, in this impact, the COVID-19 environment, brand becomes even more important as you distribute high-quality food into supply chains. And the impact that we have in terms of the mix of our business is, as I've said, approximately half of our business is retail and half of it is food service. And so as we work through the impact of COVID-19 on our financial year, and obviously, we have a very challenging end of financial year in terms of the actual impact of COVID-19, we'll pivot accordingly. And what we've been trying to context in our deck today is that we have a large retail presence. We'll continue to actually expand in that this year. And then we'll also work with our food service partners as they come back online to hopefully make sure that we're in a good position there as it becomes apparent when it does in terms of what that's going to look like market by market, and that will look different globally. For instance, we're already seeing orders coming in out of places like Europe as Europe starts to open up again. But it's really too early to be able to ascertain what that looks like in terms of the FY '21 year.

Okay. And as part of that, with -- you're talking about a cost reduction program as well. So can you give some targets there around the cost reduction in the next sort of 12 months or so?

We -- yes. Look, I haven't given targets on the cost reduction. It's obviously extremely fluid situation that we're in at the moment in terms of the FY '21 year, Paul. What I can tell you is, and it's absolutely at the top of my mind, and we're working hard on making sure that we have every sort of controllable cost in mind, and we actually analyze any sort of cash outflow with minute detail before we let that money lead to the front door. So we obviously made some announcements in our letter to shareholders a couple of weeks back. We'll continue with that rigor around controlling costs going forward for the entire year.

And just -- then just finally on the -- so to return on capital, which is obviously a bit tricky when you've got capital growth in your land and your cows and your cattle. Can you, I suppose, define how we should be viewing that return on capital number, which is still quite low, and your target and how -- the steps to get there, please?

The way I think about it, and you've asked this question before, Paul, I mean, the return on capital for us is an interesting measure when you have such a large asset portfolio that we've got. We believe our assets are actually an intrinsic part of the value for AACo going forwards. And given the improving performance of the business, I'd like to see that not only with the improvement in our land valuations but also an improvement in our operating performance, we'll see that return on capital improve. But the assets are intrinsic to what we do, and they will always have an overall impact in the way that you measure return on capital in the traditional sense of it. Nigel, you've got anything you want to add there? Or...

No, I think you've covered it, Hugh.

[Operator Instructions] There are no further questions at this time. And that does conclude our conference for today. Thank you for participating. You may now disconnect.