Comvita Limited (CVT) Earnings Call Transcript & Summary

Welcome, everyone, to the Comvita FY '24 Full Year Results Presentation. My name, Nigel Greenwood, CFO. [Operator Instructions] I will now hand over to David Banfield, CEO.

Good morning, ladies and gentlemen, fellow shareholders, and welcome to the Comvita FY '24 Full Year Results Presentation. The theme of the presentation today is agility in unpredictable times, and I'll now start the presentation with the financial headlines on Page 3. Our revenue for the year-ending June 2024 was $204.3 million, minus 12.7% or GBP 28.9 million versus PCP. Our Greater China revenue was minus GBP 19.2 million or 17.6% with a GP impact of minus $15.3 million versus PCP, and our U.S. market revenue was minus $9.5 million or 26.6% with a GP impact of minus GBP 5.3 million versus PCP. Our gross profit for the year was 55%, minus 300 basis points versus PCP. In this year, as we've already disclosed, we incurred a noncash impairment of $59.8 million before tax. For EBITDA, I'll share with you the reported and underlying numbers. Our reported EBITDA was a loss of $59.6 million, minus $90 million versus PCP. Our underlying EBITDA was GBP 14.6 million or minus GBP 18.9 million versus PCP. Our net profit after tax reported was $77.4 million loss, minus GBP 88 million versus PCP, and our underlying net profit after tax was a loss of GBP 5.6 million. Inventory finished the year at GBP 134.4 million and net debt of $79.7 million. Our revenue and associated gross profit in key markets around the world were hit by a combination of general macroeconomic slowdown in our biggest market, price competition in entry point segments of Manuka honey and Manuka honey market contraction in our biggest market. Oversupply from pre-2019 has created a glut of honey that exporters are discounting to clear as many exit the industry. For Comvita, we were planning for growth or continued growth in FY '24. However, our high fixed-cost model has impacted our subsidiaries' net contribution disproportionately. Our response, we've launched a good and better product range to target short-term value consumers and also expanded distribution. This range was launched into the China market in April 2024. We've enhanced consumer education on Comvita quality and partnership with other high-profile premium brands across Asia. We've also increased regional new product development to drive trial, category excitement and relevance for local consumers. With the Comvita brand, we're focused on premiumization, leveraging our science advantage and our forest for sustainable supply. The premium segment delivers higher loyalty and repeat purchase. Recently, we announced the discovery of Loratadine, which opens the opportunity for proven efficacy claims for consumers. In addition, our forest strategy delivers a sustainable footprint, preferential pricing and quality for our premium segments. Our $10 million to $15 million cost-out program is designed to build agility between economic cycles.

I'll now present to you our income statement. Revenue at $204 million, 12.7% down on PCP. Our gross profit percentage of 55% was 300 basis points lower than last year. That was through a combination of lower manufacturing recoveries as well as the revaluation of our AP harvest and FY '24, which I'll cover off a little later. Our reported NPAT at minus $77.4 million was impacted by a combination of the impairment of $56.1 million after tax and a number of nonrecurring costs of $15.7 million after tax, so that our underlying NPAT was minus $5.6 million, impairment and nonrecurring items. Here on this slide, I provide a reconciliation of our noncash impairment as well as a number of the nonrecurring costs that we incurred in FY '24. We tested for impairment because there was an indication of impairment due to the large material gap between the company's net total assets and its market capitalization. You can see the outcome of that was a total asset impairment of $56.1 million after tax and before tax, $59.8 million. With respect to nonrecurring items, we had a number, including ERP costs of $7.2 million. MVIO, restructure and Medibee impairment, $6.9 million that are offset by the benefit of the Makino sale, insurance proceeds and the Honeywell contingency consideration release combined equaling $3.9 million. We also undertook a revaluation of our FY '24 pay harvest from our brief operations, which reduced inventory by $4.2 million. The net impact before tax being minus $2.4 million and combined with some other one-off negative tax impacts resulted in the after-tax underlying result of $5.6 million loss. On this page, we provide a reconciliation of the group results. At the beginning of the presentation, David set out the reported results and the underlying results for both EBITDA and NPAT, and this page shows you how those numbers were generated. In respect to our key balance sheet items. Firstly, we have our net debt finishing at $79.7 million, which was $26.3 million up on last year, but in line with the guidance that we had provided earlier. The key issue with our net debt position was that you will see that it's been reflected as current on our balance sheet. That was as a result of a breach of a bank covenant as of 30 June. The bank has subsequently waived the rights associated with that breach, and management are currently negotiating a revised covenant structure with the bank syndicate to be completed in September. Our inventory finished at $134.4 million and net after adjusting for the $4.2 million in valuation of our honey hubs. With respect to the breakdown of inventory, you can see that we reduced our raw materials and other inventory by $15 million to $67 million in FY '24. However, our finished goods increased by $17 million to $64.6 million. This is a consequence of us building inventory end market for anticipated sales that ultimately didn't materialize. From a cash flow perspective, we had operating cash flow of $5.3 million this year versus $8 million last year. You can see the other movements in our cash flow statement on this page, which I won't go to in further detail at this time. In response to the difficult trading conditions, we have a cost-out target of $10 million to $15 million annualized versus FY '24. In FY '25, we anticipate realizing between $5 million and $10 million split between COGS savings and OpEx savings. However, on an annualized basis, we anticipate that will be $10 million to $15 million. You can see that we have already reduced our head count since FY '24 by 53 positions. So with respect to the challenges and actions that we have, the issue, lower sales than forecast has meant that despite reducing inventory held of raw materials. So with respect to the challenges and actions that we have, the issue, lower sales than forecast has meant that despite reducing inventory held of raw materials, cash is still tied up and elevated and finished goods, preventing us from paying down our debt. Our debt at $79.7 million is well above our targeted leverage ratio of 1 to 1.5x and as a consequence, we incurred interest charges of $8.7 million in FY '24, $3 million higher than the prior year. As noted earlier, we increased our finished goods and market to meet failed -- to meet the demand that failed to materialize. However, the finished goods and market does enable us to activate campaigns to celebrate anniversaries in FY '25, including our 20 years in China and 50 years for the Group. So the actions that we have taken to date include increase in market activity, reduced finished good inventory in FY '25. Inventory reject from focus, freeing up cash, and paying down debt, along with the sale of noncore assets such as our Makino Forester investment, which we completed in June '24. Operating cash flow in H2 was $11.4 million and full year operating cash flow of $5.3 million. Ongoing focus on improving operating cash flow is a key undertaking for management, and our capital investment has been reduced in line with our sales performance.

Our 2 focused growth markets are Greater China and North America. In FY '24, sales and gross profit from these 2 markets combined was minus $28.8 million, with GP minus $20.8 million versus PCP. In Greater China, Mainland China sales were minus 23% or $20 million and impacted by the partial cancellation of Key 1212 and 618 shopping festivals that are really important to our annual performance and broader honey market sales reduction of minus 17.5% versus PCP. Our gross profit was minus $15.3 million or 210 basis points due to a sales miss. Net contribution of $17.2 million was minus 35.9% due to the sales miss and our high fixed cost model. In North America, our revenue was down $ 9.5 million, impacted by the loss of distribution in one major customer due to short-term price activity. Excluding that short-term loss, offline retail grew by 19% and online revenue increased to 49% of total and was 7% up versus PCP. Our gross profit was minus $5.3 million or 160 basis points due to sales miss. And again, our net contribution of $4.7 million was minus about 47.5% due to the sales miss and our high cost -- high fixed cost model. Looking at our other segments. As you can see, rest of Asia sales were up by $5.3 million or 16.6%. Sales growth contributed by HoneyWorld acquisition in Singapore supported this growth. Our net contribution of $2.7 million was down by nearly 67% due to brand investment for growth, integration costs plus the impact of low-price competition. In ANZ, our sales decreased by $4.4 million or 10.8%. The China market slowdown has had a knock-on impact to the ANZ segment, our Asian health or Daigou market and low-price competition are also targeting entry point levels. Our net contribution fell in line with sales, down $1.3 million or 11%. In EMEA, our sales decreased by $ 2.2 million or 38.1%. The segment remains subscale and low-price competition persists in the U.K. Moving in to take a closer look at the China market. In FY '24, there was a surprise contraction in the China market total honey sales from July 2023. All honey sales through key channels were down by 17.5%. The Manuka honey category sales were down by 15.5%. For Comvita, our FY '24 Manuka Honey sales through these channels were down by 20% on a like-for-like basis, and the performance declined due to a cancellation of major China shopping festivals 1212 and 618 and the strength of our China New Year performance in the prior comparable period. In addition, we saw aggressive and unsustainable price activity from competitors in entry point categories. Our market share has reduced from 60% in 2022 to 54% in FY '24. In July, total honey market showed signs of stabilization with July total honey sales down 3.5%, but Manuka sales up 7.3% with Comvita increasing share. Here, you can see the Comvita Manuka Honey sales out year-on-year through the 3 channels of Tmall, JD, and TikTok. As you can see, in the period up to October, our revenue was up 1% versus FY '23, but the major gap occurred during the 11/11, 12/12, and Chinese New Year celebrations and also with the cancellation of the 618 Festival. Looking at the segment as a whole, you can see our total segment revenue of $89.8 million was down by $19.2 million versus PCP. Our direct margin remains strong, and our net contribution of $17.2 million or 19.2% continued. Our market share has been impacted by short-term price promotions and entry point segments. New ranges have been launched to target value consumers and regional NPD is performing well to increase our category reach and relevance, and I'll come back to that. The work the team have done in China to build a premium positioning for the Comvita brand remains a significant priority. Here, you can see 3 examples of our leadership in action. On the first 2 pictures, you can see our current in-store presence in some of our high-profile offline retailers. And on the right-hand side, you can see our pavilion at the CIIE International Exhibition in November 2023. In addition to this, we carry on building a premium proposition in line with China consumer needs. One of the unique elements of the Comvita model is having a team on ground empowered to build local product solutions designed to local consumer needs. On the page, you can see 3 examples: Night Honey, Collagen Drink, and Ginseng Manuka that have all been launched and performing well. This enables us to differentiate ourselves from our exporter competitors. We continue to build our presence and affinity through retail, through international hotel partnerships in combination with key retail outlets, where its taste and lifestyle come together, and with brand collaborations across various high-profile celebrities. When we look at the challenges and actions in the China market in totality, there was abrupt change in consumer demand caused in part by macroeconomic challenges, cancellation of key shopping festivals, and aggressive price activity in entry point segments. Sales out data that we shared today is available for Tmall, JD, and TikTok, representing around 1/3 of the category. Total honey market revenue dropped 17.5%, Manuka market revenue dropped by 15.5%. We have taken action to harmonize pricing to focus on our strength in off-line channels and have added focused resource to enable more balanced distribution. We've launched our value range to target those consumers driven by value, and we're undertaking pricing tests to optimize volume, value, and market share. New regional -- new product development is designed to attract new consumers and additional usage from existing consumers. Our brand premiumization and long-term building continues. In addition, we have targeted OpEx reductions to mitigate revenue impacts on the business. In North America, our total revenue was down by GBP 9.5 million, as I've already shared, revenue was impacted by loss of distribution in one customer. We have refreshed our brand value proposition and upgraded marketing collateral. We are the fastest-growing Manuka honey brand in the natural and grocery channel in terms of sellout to consumers. Our net contribution of GBP 4.7 million fell in line with the sales. Here, you can see some of that refreshed brand expression where we talk about both product and functional benefits along with emotional engagement with a few minutes escape for indulgent well-being. As I shared, our challenges and actions with the lost distribution in the U.S. A customer decided to undertake a retail price test versus us in the market, tested on quality, volume movement, and sustainability of supply. That trial is taking place for a year. We strengthened the team. We've appointed a new country manager and strengthened online performance, including Amazon up by 60%. We've refreshed brand collateral and improved performance marketing. Off-line, we're driving trial and velocity in-store. As I've just said, we are the fastest growing Manuka Honey brand in grocery and natural channel, and we've developed new online off-line distribution, adding 700 stores in April. Sell-out performance is currently encouraging. Finally, I want to come to a section on industry dynamics. On this page, you can see honey supply between 2008 and 2019. Hive numbers traveled between '08 and '19, peaking at just under 1 million hives with exports growing by circa 500%. This explosion in supply created an industry overstock. And between 2020 and 2023, honey production has fallen by 56%. Ongoing supply is now more aligned to demand. However, clearing industry overstock has created aggressive and unsustainable clearance activity in entry point categories. Hive numbers are forecast to be between 400,000 and 500,000 by the end of 2025. The current APR model economics are unsustainable for many operators. Comvita forests that we've already planted offer a sustainable and cost-effective supply going forward. Our forests are forecast to account for 44% of our total supply needs by FY '30. These forests also give us cost advantages with 20% cost saving per hive, which is estimated to save us $4 million per annum. On this page, you can see total New Zealand honey exports from 2002 to 2023. Exports grew fivefold between 2008 and 2017. Between 2017 and '19, exports reduced by 18%, but over '18 to '21, they grew by 10%. Since 2020, Honey exports have fallen in total by 26% from their peak. When looking at key demand dynamics, the U.S. is the biggest single market for Monofloral honey in the world. There is no dominant brand in that market and compete currently lack scale, which we are aiming to change. China market is the #2 globally. Since 2020 exports to China have grown at a compound annual growth rate of 3%, whereas Comvita exports to China have grown at a compound annual growth rate of 15% since 2020. We've grown our market share and current market share is at 54%, down from the 60% we reported in 2022. Aggressive price competition caused by Honeyglat is targeting entry-point segments, the good and better ranges that we've launched to target value-seeking consumers are in market as of April, and we see early signs of China Manuka honey market stabilization in July. In summary, we're incredibly disappointed by our FY '24 results, impacted by the market challenges that I've shared today and exacerbated by short-term price-driven competition created by oversupply in the industry. Our underlying FY '24 net profit after tax was a loss of $5.6 million. Action is already underway. We've launched our good and better range to target value consumers and target increased distribution. Regional new product development is showing encouraging growth with the fastest growing Manuka brand in grocery and natural channel combined in North America in terms of sell-out to consumers. Our 10 million to GBP 15 million cost-out program is on track and is designed to ensure agility through different economic cycles. Our focus is on cash flow generation and debt reduction and particularly inventory reduction. Banks remain supportive of our position and a new covenant structure is expected to be confirmed in September. When we look further ahead, the global honey category is forecast to grow at a compound annual growth rate of 6.5% out to 2030. Global searches on Google for Manuka Honey continue to rise. We see early signs of stabilization in China consumer demand, and we see supply over stocks for premium quality products starting to correct themselves. Comvita forests that are already planted give us confidence of future supply with a competitive cost base in addition. Before I hand back to Nigel, I want to acknowledge how extremely disappointing the results we shared today are particularly after 3 consecutive years of record performance up to FY '23. Throughout FY '24, we faced difficult trading conditions globally, along with aggressive price activity from competitors caused by industry overstocks. I'd like to thank the global Comvita team for all their hard work and resilience during this past tough year and equally recognize their continuing belief in our ability to work in harmony with bees and nature to and protect the world. Thanks very much. Back to you, Nigel.

Before moving to your questions, I would first like to hand over to Brett Hewlett, Chairman to make some closing remarks.

Thank you, Nigel, and thank you, David. Look, there's certainly no sugar coke in this. This is a terrible result. It's been a very, very tough year on so many fronts. Shareholders have fallen the brunt of those challenges. And certainly, as Chair and as a shareholder of 20 years, 2024, there's been nothing short of a humbling experience. Many will be thinking that this is a case of perhaps too little, too late in our reaction. And I think to be fair, that's be a criticism. I want to provide assurance to all of our shareholders that we are acting with urgency. We will adjust our course. We are adjusting our course, and we will cut our cloth to suit the current realities. I would also provide assurances to our shareholders, underlying this result as a quality company with a quality team, a leading premium brand. We have far-reaching capability and competitive advantages across the length and breadth of our value chain. We will be both agile and we will be innovative in how we respond as we've done in the past as we will do now and as we'll continue to do in the future. I want to thank you very much for your continued support. I would also just like to acknowledge the work that David has done as our CEO for the past 4.5 years. I want to appreciate and acknowledge his unwavering dedication and devotion to the organization, and I wish him well in his future endeavors. I'll hand it back now to you Nigel for questions.

Thank you, Brett. So we're now entering the process where we will answer your questions. [Operator Instructions]. We have one question already, which I'll read out. Have you sold all of your monocatry forest and cash out of the Makino Forest investment?

So as Nigel explained earlier on, we have finished our joint venture with on Makino. As part of that finish, obviously, we still get supply of product, and that's an important source of supply to us. So as Nigel explained earlier on, we have finished our joint venture on Makino. As part of that finish, obviously, we still get the supply of product, and that's an important source of supply to us. But just the joint venture itself has finished.

Next question from Christian Bell. Can you please give an update on the $50 million target having consistently reiterated this for 3 years, the company appears to have dropped this as a possibility, despite calling out recent performance has been due to current economic conditions, should we assume this was never a real possibility? It's difficult to reconcile given how fast the target has been dropped after being so confident such a long time.

Christian, look, thanks for the question. As you know, we shared our GBP 50 million target back in 2020 when I first joined the company through 2020, '21, '22, and '23, we saw a clear line to deliver a GBP 50 million EBITDA revenue number. Analysts following the company also saw the same route to deliver that GBP 50 million EBITDA number. However, given the economic reality that we faced in this year, we have withdrawn that guidance and we've retained the position that at this stage, we're not providing guidance, but we do see opportunity once the overstock that has impacted our performance and consumer confidence returns back to normal.

[Operator Instructions] It would appear we've got one through another question from Christian Bell. What process do the independent value we go through when valuing the inventory? And would you consider writing it down and selling it at a discount to fix the balance sheet? With respect to the valuation of inventory that was not part of the Deloitte independent valuation report work undertaken. Their work was done on reviewing the potential impairment that existed within Comvita. With respect to our inventory balance, that has held at the lower of cost or net realizable value. So as it sits there today, there is no impairment associated with our inventory.

If I can just add, Christian, that as Nigel shared earlier in the presentation, we have finished goods in the market. We are currently testing volume, price elasticity to enable us and to sell through inventory, particularly as we celebrate 20 years in the China market, but our activity is entirely focused on inventory reduction, sell-through of inventory in the market, and then obviously returning cash from that back to the group.

Next question from [indiscernible] Lee. How many jobs did you cut in China?

Look, thank you for the question. But at this stage, we wouldn't talk about individual markets. We've shared this is obviously a sensitive time for the group than anyone whose positions are affected. So we've shared at a total level, the changes that we've made and the reasons why we've made those changes, but wouldn't comment on individual markets.

Next question from Christian Bell. Can you provide some feedback as to why the potential bidder decided not to progress if they were a long-term investor and could see the potential to reach $50 million EBITDA? It's hard to understand why they couldn't look through the current weakness.

I can answer that. Chris, thank you very much. Look, the bidder spent a lot of time on this organization. They were investigation due diligence was comprehensive. They had quite literally an army of consultants and advisers to look at the business and their approach came based on as we indicated the market at quite a significant premium to the current trading price when the first approach was made. It was unfortunate that during that time, of course, we started to see the deterioration which announced the profit downgrade in November and then another one in January, late January, and February. And we saw the deterioration and the impact playing out into the China market in particular. And it's fair to say that the bidder couldn't get the confidence around the future growth potential, given the economic downturn and the economic situation that they have seen also unfold. So it was an unfortunate timing. They came away with a very positive view of the business of the team and of the Board and the way that we were running the company in our strategic direction in the long term, but it's just the short to near-term confidence that they couldn't develop.

What do [indiscernible] look like for those brands you have launched into the value segment?

Look, it's very early days to say the -- as we've already shared that we launched in limited distribution in April. Obviously, that whole picture is skewed because of the partial cancellation of 618 year-on-year. So we'll really see the performance through the period from now until the end of the year, and then we'll be able to give you a better update on both those ranges, but also on the impact of our price testing that we're undertaking in the market.

Given the pressures on price and oversupply in the market, why would you not get an independent assessment of inventory value? That was the question that was asked by Page. Page, the reality is we are required to record our inventory at the lower of cost or net realizable value under accounting standards. As a result, we cannot write down our inventory, even if we wanted to because it is recorded at net realizable value.

If I may also note, just to expand on that, it would be remiss for me not to look out inventory undertakes a review every single year and every single year under audit by KPMG, they test and analyze those the product samples. They've never come up with any indications of impairment. The quality of our inventory stands up for the test of time every single year. I think it was quite good through this process. When we looked at impairments and areas of possible impairment of the business, there was never a discussion that lasted very long around indicating there was anything wrong with our inventory.

Next question from Nick Combe. How do you see your cash flow for the current year?

Thanks for the question, Nick. Look, obviously, given the performance of FY '24, our absolute emphasis is on generating positive operating cash flow, reducing inventory, paying down debt. So we're forecasting that to be reflected in the cash flows as we sell through existing inventory held in market.

Next question from Christian Bell. What are the other drivers of the cost out in addition to the reduction in Hedcor, can you attribute the $10 million to $15 million related to each driver?

Christian, look, we -- obviously, the drivers go primarily through cost of sales. We've taken a thorough review of ways to simplify the way we produce. We've looked at tolerances we have into shelf life. We've looked at formulation. We've looked at the way we blend hones to give us the optimum performance. And as I've already said, we've also then cut activity that doesn't help us reduce our operating footprint or simplify the business in general. We'll come back and consider the granularity of that as we go through and consider whether that's appropriate when we come to the ASM.

Next question from James. Are you concerned that aiming at value consumers in China might initiate a further race to the bottom there?

Look, I think that's a really good question. The thing that -- look, I'm particularly proud of is the work that the team in China has done to build such a premium proposition. I know most of our shareholders never get to see just how brilliant we are in the market at delivering incredible execution, off-line, innovative solutions, collaborations with high-profile hotels, celebrities. We have a level of brand credibility that no one else can match. So when we're going through we're looking at specific product categories and in no way looking to undervalue or undermine the incredible work that the team has done. I shared earlier that if you look at exports from New Zealand to China since 2023, so total exports were -- have a 3% compound annual growth rate. Comvita exports have a 15% compound annual growth rate as the work that we've done to premiumize the category and actually turn up in the way that you see in some of the photos today maintains the focus for us. But in addition, we are targeting those value consumers hoping to show them the Comvita difference and eventually then trade them up to our more efficacious products that we know give even better health outcomes.

Next question from Ubern Lee. Did you make a profit from those new products in China?

Again, thank you for the question. The products that we've launched have been profitable. And look, honestly, we look at it in 2 ways, at a direct product level, do we get a contribution from those products? And the answer is yes, but also what does it do for our brand image and our ability to create solutions that meet particular market needs? Again, team in China has done an incredible job to say, well, let's look at elements how -- where consumers use our products and how can we give extra usage at certain day parts, be that first thing in the morning, be that the skin in the collagen drink, be that night honey, albeit some of the other elements that we've looked at. So we get a direct benefit, but we also get an umbrella benefit with them acknowledging our ability to understand local consumer needs. And again, that's the benefit of having a team on the ground in the market who were able to respond to emerging needs in the market.

Next question from Christian Bell. Would you consider discounting the inventory to sell it quickly and help pay debt faster?

Look, Christian, we've already explained that our focus is on selling through the finished goods that we've got in the market. We won't go into a specific pricing strategy. We've got to have a fine line between protecting the premiumization that we've been so focused on delivering, but also targeting those value segments that we see in the market. So we are absolutely focused on inventory reduction. We're absolutely focused on cash flow, but we'll have to balance between those 2 elements as we go forward.

Next question, talk to your appetite to raise capital to reduce debt pressures?

Look, the appetite is 0. Of course, we have no interest and no desire to raise capital certainly prices -- share prices, we'll be doing everything we can to reduce debt through freeing up operating cash flows.

Next question from Christian Bell. Are you able to please tell us what the initial offer price was from the potential bidder?

No, look, unfortunately, that's a confidential matter. We indicated to the market that it was at a significant premium to the share price trading at the time of the announcement. That still was valid. And I can also say that through the various stages of the offer being put to us that they never altered their offer. It was held through different stages of the process.

Next question from Ubern Lee. How do you compete with Manuka doctors in the New Zealand market?

Look, for the purpose of this call, we wouldn't talk about specific action against specific brands that we trade against except to say one thing in general about the New Zealand market. We've talked at length about the issue that we see from a regulatory point of view that it feels entirely inappropriate for us that you can sell a product in New Zealand that will not meet the international standards for Manuka Honey. That limits some opportunities for us, but we believe that New Zealand consumers deserve the same quality product that international consumers get, and that's what they get with Comvita.

Next question from Christian Bell. Can you please elaborate on initial discussions about what the new covenant structure will be with the banks, i.e., the metrics and time frame to meet those? Christian, look, at this stage, these conversations with the banks are confidential, but the company will update the market once we have put those new covenant structures in place during the course of September to ensure the market understands what our new covenant structure will be, and it's targeted for the full period of FY '25.

If I could just add one thing that we are confident that we will agree that new structure, new covenant structure with the banks. And as we say, we're expecting to update the market in September with that news.

Another question from Christian. Okay. What are the current metrics then, please? The current metrics, we have 4 covenants that we can't be measured on. One is an equity covenant. One is an interest cover ratio covenant. One is a net core debt leverage ratio covenant. And the last one is a stock and debtors covenant. So these are the 4 current covenants we have in place. But we do expect that by the time we have finished our discussions and negotiations with the banks, we will have a different covenant structure for the FY '25 financial year. Next question from Page. Can you please provide more detail around the Ape's harvest revaluation? What is your plan for the upcoming years for harvest? Are you able to limit more inventory you take in?

Thanks for the question, Page probably 2 parts to the answer. The first part is the revaluation took place because when we got to the end of the year and we looked at independent data, we decided that the inventory that we bought in was at a higher cost than we felt was realistic. So we've reduced the price accordingly. For the FY '25 harvest, that will obviously come into our inventory in the period from January onwards. And we obviously have a budget, but it would be highly dependent upon the weather, and it will come from our current circa 17,000 hides that we have in New Zealand.

Next question from James. Why do you believe the proposed Board structure will help the risk the current level of company performance?

Let me take that one. Thank you, Nigel. Look, I think I'm very, very privileged to have a great bunch of Board of Directors. We've been through one hell of a very tough year and shown incredible resilience. I'm very proud that Bridger Coats was willing to take on the challenge of becoming a board chair, a very appropriate experience and she provides great leadership and great wisdom around our governance processes. We were sad, of course to lose Julie Halul. Julie has also been a wonderful director, and we'll be looking to replace her with somebody appropriate. We were about to appoint someone very imminently, and we'll be able to update the market very shortly. But we feel at this stage, as we're going through some changes, we just need to have a smaller, tighter, more experienced board makeup, and I believe we've got that.

Next question from David Oxley. Can you explain the very weak Asia market result and the performance of HoneyWorld?

David, yes, look, we did cover that a bit earlier, and happy to cover it in a later conversation. But ultimately, we saw through our Southeast Asia segment, we saw overall revenue growth, which is primarily which is totally caused by our performance in HoneyWorld at a net contribution level that didn't flow through to earnings through a combination of marketing investments that we needed to make in the first year of integration with HoneyWorld, integration costs in totality, and price competition in the sector that we've spent a long time talking about today.

Question from James. Has your ERP implementation gone to plan? And have there been any cost blowouts?

There has been a delay in the implementation of our ERP system. So it's due to go live currently at the end of the year. And there's a group of very dedicated people, making sure that, that system happens or that system upgrade happens, it is still a critical part for us as it will enable us to have enhanced master data, better processes, scalable infrastructure, and more access to leading information resulting from -- or showing us performance in the market in a more live manner, which is crucial to give us more visibility going forward.

Question from Christian. Can you please specifically what the covenant metrics are for EG equity? There's a debt-equity ratio of 30%? For our equity ratio, that is total shareholders' funds to total assets, the level of 35% at the covenant, and we are comfortable with an excess of that particular ratio for that comment. There will be no further questions. We'll end the Q&A session here and thank you all very much for joining our presentation today with myself, David, and Brett, and we will update the market further in due course and at our annual meeting.