PGG Wrightson Limited (PGW) Earnings Call Transcript & Summary

Right. I've just had the thumbs up. Good morning. Welcome and great to see such a good turnout. I'm Garry Moore, Chair and Independent Director and a member of the Audit Committee. I joined the Board in July 2022 and became the Chair in February of this year, and I'd like to welcome you all to the Annual Shareholders' Meeting. Today's meeting is a hybrid meeting with some attending in-person, while others via Computershare's online platform. Before we get started, I'm obliged to point out a few housekeeping matters in the unlikely event of an emergency, where the wardens will direct you to the safe exits, which are the door you came in and this door on my right. In the case of the seismic event, take cover and the staff will advise you and assist you evacuate the building if necessary. I'm told to tell you not to run, but you'll have to be pretty quick to keep up with me. Okay? We're recording this meeting, and it will be posted on our website later today. I confirm that we have a quorum and accordingly declare the 2024 Annual Shareholders' Meeting open. We will refer to PGG Wrightson Limited as PGW throughout this presentation today. The online meeting is being held via Computershare's online platform, which allows shareholders, proxies and guests to attend the meeting virtually. All attendees can watch this live webcast of the meeting and read the documents associated with the meeting. All shareholders attending whether in-person or online can participate in the meeting and submit questions and cast votes. If you're eligible to vote at the meeting, you will be able to cast your vote under the vote tab and once voting has opened, the resolution will allow votes to be cast. To vote, simply select your voting direction from the options shown on the screen. And when your vote is cast, tick will appear. If you change your mind on that vote before voting closes, you can select change your vote. You can change your vote up until I declare the voting closed, which will be done at the end of the meeting. And in order to allow you enough time to vote, the voting is now open. The resolutions will be available on the vote tab and please submit your vote at any time. [Voting]

The PGW Board had one change of membership during the year. U Kean Seng relinquished the role of Acting Chair, and I assume that role is Chair on the 16th of February in 2024. Before we begin the formal business of the meeting, I'd like to introduce the Board who are attending our meeting today. And they are in the first row, in the center of the first row Deputy Chair and Independent Director, Sarah Brown; to Sarah's right, Independent Director, Meng Foon. And the Director, U Kean Seng. Welcome. I'd just like to note that independent director Charlotte Severne has an apology for today's meeting. Charlotte is in Wellington convalescing from a routine medical procedure. Members of the executive team are here today, and they are seated well, alongside me, firstly, PGW's Chief Executive Officer, Stephen Guerin, along next to Stephen is the financial officer, Chief Financial Officer, Peter Scott, and on his left is General Manager of Corporate Affairs, Julian Daly, who is also our Company Secretary. Good morning. I'd like to acknowledge members of the executive team who are in attendance in the front row here on my right. On the far right, we welcome General Manager Retail & Water Nick Berry. Hello, Nick? General Manager, People & Safety, Sarah Mears; and General Manager of Wool, Rachel Shearer. We have one apology from PGW's Livestock & Real Estate General Manager, Peter Newbold, who is unable to attend today. At August 2024, Rachel Shearer, who was General Manager People & Safety was appointed General Manager of Wool and Sarah Mears who was a Group Human Resources Manager was appointed General Manager of People & Safety. I'd like to acknowledge representatives from our share registry, Computershare, the door when you came in. And representatives from both BNZ and Westpac, who are members of our banking syndicate. We're also joined by the New Zealand Shareholders' Association CEO, Oliver Mander. I've taken my glasses off of Oliver, Oliver, I think that's you. Yes. And I think you have Max Smith here too, yes, I think. Hello. And I'd also like to welcome the Managing Director of Elders, Mr. Mark Allison, who's attending in person today. Our auditors Ernst & Young are in attendance, and I'd acknowledge that this is the last meeting of our audit partner, Bruce Loader, who is retiring from the partnership. And we wish to thank -- I personally would like to thank you, Bruce, for your work over recent years. And before we start the formalities of the meeting, I'd like to recognize the loss of PGW's -- that PGW has experienced in April this year with the passing of Grant Edwards, Grant was General Manager of Wool and Grant had dedicated 40 years to the business and his leadership will leave a lasting influence as a steward of Wool, his patience for the industry was unwavering, and it was a highly regarded by his peers. Grant was a member and share of various industry bodies and his strength was navigating industry politics to ensure outcomes were good for growth, the oil industry and, of course, our business. And I'd also like to acknowledge the sad passing recently of Victor Schikker, a valued member of our livestock team who passed away following a tragic accident at the Staveley ice rink in August. Victor has given nearly 50 years of quality service to the business, and he was a company man and he progressed through the ranks and became a specialist dairy rep and as the mid-Canterbury IHC Calf scheme coordinator. Victor put in countless years and canvassing tagging, scanning, selling calves to help raise funds hundreds of thousands of dollars of funds in mid-Canterbury and for the IHC. As I said, we have an apology from Charlotte Severne, Independent Director. And I've noted the apology of Peter Newbold. I'd also like to note the apology of Mr. Alan Lai from Agria Singapore Limited. The Company Secretary has confirmed that the notice of meeting was sent on the 17th of September 2024 and all registered shareholders and other persons entitled to receive those notices. I confirm the minutes of the company's previous Annual Shareholder Meeting, which was held here on the 25th of October 2023 were approved as a true and correct record at the Board meeting on 27 November 2023. And the minutes of that meeting are posted on the shareholder information section of our website. The financial statements and the reports of the directors and auditors for the year ending 30 June 2024 are set out in the company's annual report. And on the 17th of September 2024, the annual report was posted on PGW's website and on our NZX page and a hard copy of the report has been sent to shareholders who had requested it. We also, at the time, released our sustainability report for the year ending 30 June 2024, which provides our stakeholders with a view of our sustainability performance and activities over the past financial year, including our climate-related disclosures. Reporting on sustainability is a crucial component of our commitment to transparency. This is the third year that PGW has formally reported on sustainability as part of our annual reporting process and it is a first year of mandatory reporting under the New Zealand climate-related disclosures legislation. And that comprehensive sustainability report is available on our website. And it's the first year, first occasion for the release of a stand-alone sustainability report, and it goes alongside the annual report. I'd just like to note that we refer to both GAAP or Generally Accepted Accounting Principles and non-GAAP performance measures. We use the operating earnings before interest, tax, depreciation and amortization, what we call that operating EBITDA as a key measure of performance, and I encourage you to refer to the full accounts for details. of how this translates to other GAAP measures. I can confirm that 856 shareholders have appointed proxies for the purpose of this meeting. with respect to approximately 41 million shares. That's the opening formalities, and I'll now move to the general business of the meeting. I'd like to begin by commenting on the corporate governance matters before providing an overview of the performance results and sustainability highlights of the 2024 financial year. And then I'll hand over to our CEO, Stephen Guerin. And Stephen will provide a financial and operating overview of the individual business units, and he will also summarize how the business is trading for the current financial year-to-date, noting that it's very early into the new financial year. And I'll conclude the presentation by discussing our forecast guidance for the full year to 30 June 2025, which was released to the NZX yesterday afternoon. An opportunity to respond to questions will follow before we move to the formal business of resolutions that will be put to the meeting for voting today. As outlined in the notice of meeting, the business of the meeting comprises three ordinary resolutions, being the reelection of Dr. Charlotte Severne, an Independent Director, the reelection of U Kean Seng as a Director and authorizing the Board to determine our auditor's fees. Firstly, I'd like to briefly address the corporate governance issues that arose earlier this year, as I consider those events require some comment. You may recall that Agria served a requisition notice in February, requesting that a special shareholders' meeting to be convened to consider resolutions seeking a number of Board changes. That requisition followed several days of discussion between the independent directors and representatives of Agria. And as we noted at the time, the independent directors were disappointed that the formal public process was initiated given that we did not consider that was in the best interest of PGW nor PGW shareholders as a whole. It is well understood that the agricultural sector has been through a difficult period of cycles and many farmers and growers are facing challenges. Accordingly, the timing of that formal requisition to remove independent directors during the period -- during that period was unfortunate and disruptive from a market perception perspective. We saw this reflected in the media reporting on the matter and in our share price as these events eroded confidence in the stability of PGW's governance and ownership. Now PGW wishes to roll a line under that period and move forward positively because in the present difficult trading environment, it is more important than ever that we remain unified and work collectively in the best interest of the company to tackle the difficulties before us. Accordingly, I do not consider that there is a great deal of benefit to be had and going into much detail today regarding the background of those discussions that took place at the time. However, I will say that when Agria withdrew the notice on 22nd of March that was most welcome. Together with the confirmation that Agria and the PGW Board had determined that the current composition and the majority of membership on the Board continue to have the appropriate balance of skills, expertise and independence to lead the company in a positive way forward. I'd like now to comment on the financial and sustainability issues. It was a challenging year for the sector and for PGW. The operating revenue of 900 -- or just under $916 million was down almost $60 million, which is about 6% down on the prior year. The gross profit of $235 million was down $17 million or just shy of 7% on the prior year. The operating EBITDA of $44 million was down $17 million or minus almost 28% on the prior year, and we gave updated guidance on two occasions during the year. Net profit after tax was $3.1 million, down $14.5 million or 80-something percent on the prior year, that I would point out that it was positive when many in the sector faced negative returns over the same period. However, our net cash flow from operating activities of $57.7 million was better by almost $32 million or up 100-odd percent on the previous year, which was very pleasing as we sought to manage cash flow as best we could. Sustainability highlights. We've had a 16% reduction in greenhouse gas emissions since full-year '21 -- 2021. 100% of all PGW electricity is supplied as renewable, is supplied from renewable sources, 2/3 of our vehicle fleet renewal options, hybrid, and we expect to see the proportion of hybrid vehicles increase as we renew leases over time. The agricultural sector continues to navigate challenging market conditions and the cyclical volatility is reflected in PGW's financial results. This is largely a product of the economic environment and is being felt across the entire agricultural sector. We often say that PGW prospers when our farmers and growers do well. Our clients have faced difficult conditions over the past year, and consequently, this is shared in our results. PGW has done well to continue to maintain share in the markets in which it operates. However, we have seen farmers and growers cutting back where they can and deferring discretionary spending. Another way of putting that is you can't spend what you haven't got. We continue to thrive to support our clients with all their essential production requirements, hence, the sector is in the grips of a period of austerity. We're nonessential and discretionary spending have been paused in many cases. Despite the challenging environment, our receivables have held up well, and gross margins have largely remained steady across the business. While most of the agricultural sector has been impacted, some sectors have been very hard hit. Sheep farmers, in particular, experienced soft export demand and weaker commodity pricing, and the rural real estate market has gone through a period -- a particularly quiet period. No dividends were declared in full-year 2024. And as a result of these difficult trading conditions impacting the sector and the wider economy. In that context, we saw a prudent approach to managing working cash flow. PGW's operating EBITDA of $44.2 million was down $17 million, as I said in the prior year. And that was on the back of very strong results in the 2 previous years. Retail & Water, as I said, have experienced a drop in demand as farmers and growers reduced their spend due to the challenging economic conditions. Livestock was also impacted by subdued market conditions, including significantly lower sheep prices. It was a stable year for wool and with solid pricing, although there is a significant scope for much needed value growth in wool. The rural real estate market experienced particularly challenging conditions with a subdued market and farm sales significantly down on recent years. Our operating expenditure investment in our company-wide business improvement program continued and the 2024 result is largely a product of the economic environment, which was felt cleanly across all of the agricultural sectors. As I said, revenue was down by almost $60 million. The 6% decline in revenue represents the first drop in PGW's revenue since the sale of the PGG Wrightson Seeds division in 2019. There's also -- the other thing is there's also a carryover effect of the devastation caused by cyclone Gabrielle last year, with some areas in the Hawke's Bay, Tairawhiti not yet replanted. I mentioned the net profit of $3.1 million was down $14 million on full-year '23. And this included the negative impact of a one-off noncash accounting treatment of $0.9 million for deferred tax expense due to a change in the legislation for tax depreciation on long-life commercial buildings. And our margins overall were generally pretty much in line with the prior year. So that was the fun part that I got to read all that out. Now I'll hand over to Stephen, Stephen Guerin, our CEO. He might be able to tee you up a little bit and let him address each of the divisions and our prospects for the coming year. Thank you.

Thank you, Garry. [indiscernible]. Good morning, everyone, and I'm very pleased to be here with you today. You probably appreciate from my voice, I'm coming off of the back of a flu, cold, I should say. So I got the right to recovery. So if I do have to pause, please just forgive me for that. Right. PGW recorded operating cash flows during the year of $57.7 million, which was $32.2 million higher than the prior year. The key drivers for the higher operating cash flows were reduced GO-STOCK balances from what was recorded at the 30th of June 2023 and lower income tax payments. Cash was also preserved with no dividend declared in FY '24. There has been an increased focus within PGW on cost control. Capital expenditure of $22.8 million was $5.7 million higher than the prior comparative period. This speed included the continued investment in their IT systems business improvement program that Garry just touched on and the acquisition of the co-owners half-share of the Frankton saleyards in Waikato. Our net interest-bearing debt was $59.2 million as at 30 June 2024, a reduction of $6.1 million for the prior comparative period. Excluding our GO-STOCK receivables, our net interest-bearing debt was $6.7 million at the 30th of June. PGW renewed and extended its syndicated banking facilities during the year through to February 2026. These facilities provide an extended term and working capital limits and allowed for the potential growth of the GO-STOCK book. At 30th of June, PGW had 1,565 permanent and temporary employees at 334 casualty commission agents, totaling 1,899 people. We recognize that our people are our greatest asset, and we are focused on driving a culture of excellence and safety, ensuring employees are supported, engaged, they're able to perform to their best. We refreshed our people and safety strategy to prioritize future workforce needs aimed at attracting and retaining talent for the business. We retained our commitment to developing our workforce through targeted investment and competency-based and technical training schools. Our quality assurance programs have continued, and this year, and we have launched our new management skills trading program. In the past year, our commitment to enhance our safety culture has continued to a priority for the business. To strengthen our foundation of Workplace Safety, we have partnered with Impac Training to deliver a program focusing on health and safety and well-being fundamentals. We've also created safety induction programs, mental fitness at work and online modules to address their critical control risk areas. Management of critical risks as a priority and significant progress has been made to find a safe practice expectations within the business. While it's important for our peer to understand the impact of the decisions they make, we have worked closely with the business to create our no blame culture and feedback from this year's safety and wellbeing survey shows real improvement in this area from our team. Turning to sustainability. Sustainability at PGW is a space that has matured significantly in recent times. As a business, we have deliberately put in place structures to achieve progress across the environmental, social and governance aspects of our operations. Climate change influences PGW impacts on our clients and impacts on our day-to-day operations. We recognize that climate change will continue to impact the business and likely to intensify going forward. We will continue to prepare for and manage these impacts on our business in order to support our clients the wider aquaculture and horticulture industries with climate change challenges. PGW was pleased to release its first stand-alone sustainability report, as Garry has touched on this year which includes reporting under New Zealand climate-related disclosures legislation. Our report expands our business transparency and further our understanding of the climate-related risks and opportunities we face within the business. Proactively addressing these risks and opportunities will enhance the resilience of our business to ensure we are prepared for a changing future. This also provides further transparency to our stakeholders and greater visibility for our climate-related aspects of our sustainability journey. GO-STOCK, discuss a few technical highlights we have within the business. Typical expertise innovation are woven in the fabric of our business. Our customer-focused innovation, strategic pillar focuses on identifying opportunities to offer innovation through solutions -- sorry, to offer innovative solutions through science and systems. Some of the technical highlight aspects achieved through the year are the following: we launched our SkyCount, our cutting-edge solution for efficient and accurate livestock auditing, and I'll comment on our SkyCount program will further by presentation. A sub R&D leader internship program was established where University students undertake a research and perform field trials provided us with beneficial information on the students learned about PGW and in the agricultural sector. And we continue to beta program this year. Through partnering with A Lighter Touch, PGW supports the sector to move away from agricultural chemicals towards agroecological approach, which provides sustainable crop production. In FY '24, the first year of our crowd staff source program with staff pitch issues that clients are facing to the R&D team and the tangible devices trial programs developed tangible solutions was launched. And again, we're progressing with that program again this year. Turning to the performance of the operating -- two operating businesses, Retail & Water and Agency. The Retail & Water business incorporates rural supplies fruitfed supplies and Agritrade. Retail & Water's operating EBITDA was $41 million, down $13.1 million on the prior year. Revenue was $733.6 million, back $51.7 million from the prior year. Our Retail & Water business, along with other many others of the agriculture sector and a challenging financial year and experienced a drop of demand with farmers and growers alike reducing the spend levels to respond to market conditions. This is due to multiple influences impacted the market as such an adverse included adverse weather events, aggressive competitive pricing, lower farm confidence levels and economic uncertainty with interest rates, farm gate returns, inflationary pressures and subdued commodity prices. Despite the more challenging market conditions, our retail business continued to consolidate market share in most categories. Even though these difficult times, client feedback at the market research indicators we conduct support the view that PGW is on the right track. It compares favorably in the market with regard to our professionalism, technical expertise and service. When budgets are tight, we understand that the heightened need lies to optimize value from their spend. In that context, our focus on providing the best technical service and expertise, along with leading innovation becomes even more important and differentiates our client proposition. Over the course of the year, Retail & Water business refreshed this 5-year strategy, underpinning our strategy as a strength to our offering to core competency at agronomy categories, along with the sustainability credentials. A reduction in sheep of beef numbers has created a tighter market. High farm input costs and lower sheep returns affected farmer profitability, which impacted our sales. We currently have a strong footprint in horticulture R&D, and we are moving to extend the capability of our rural servicing parts of our business with product-focused R&D. This initiative fits well with our strategy of delivering technical know-how and value add to our customers. We increasingly look to PGW fulfill the role of facilitating leading innovation. Additional R&D trials have been selected and work has been good in this area. In January 2024, our Takaka store suffered a significant damage as a result of fire in the neighboring property. PGW is a key part of the town and local community. We're pleased to have recently made progress partially we opened the site and working from temporary premises with full remediation work underway but awaiting accounts for approval. We continue to invest our store network with the opening of our new Timaru Retail & Water stores, a new bulk store extension of Geraldine. These new developments provide improved working environments with a benefit for both our people and our clients. These developments further demonstrate our commitment to support farmers and growers throughout regional New Zealand. Even on the trading conditions we have experienced in recent times, our fruitfed and supplies network has continued to set the standard for the market. The business achieved its best performance of Crop Monitoring Services in agronomy category recorded the second highest year of sales. The impacts of Cyclone Gabrielle continue to be felt. A number of our clients at the Gisborne and Hastings areas lost large proportions of their crops in 2023. Therefore, less inputs are required in this new season. Some clients lost their entire year's crop last year impacted their cash flows and income. Returns from some crops have been softer over the past year. The apple, avocado and kiwifruit industries have experienced reduced returns. The drop in returns resulted in reduced spending in some product lines. Despite a good harvest, yields of wine growers were lower than the year's harvest back 21% on last year's tonnage. Economic pressures constrained spend on irrigation systems upgrades with less transactional activity at our Water team took the opportunity to engage with clients. Our service teams spent time fostering relationships through on-farm conversations around advising on irrigation audits. Agritrade, our wholesale business division experienced a solid financial year. There has been a strong focus on improving our operations without the business through optimizing our logistical functions, encouraging bulk ordering and inventory reduction to concentrate on got our preferred product lines. Due to the lower instance of facial eczema in livestock over the past season, there were a few sales of our proprietary Time Capsule bolus treatment, which impacted the Agritrade performance. Turning to the Agency business. Excuse me. Our Agency business incorporates the livestock, wool and real estate businesses. Operating EBITDA was $12.3 million and was down $3.8 million of the prior year's strong result. Revenue was $180.7 million, which is broadly in line with the prior year. Our livestock business was impacted by tougher economic conditions. Our elevated inflationary pressures and input costs led to more conservative purchasing from farmers and a reduction at our bulk sales. Sheep prices were back significantly due to the subdued export demand from China and the increased supply from Australia. Thank you, [ Mark ]. These factors combined to reduce commissions revenue. Lower stock volumes were traded in the North Island as feed surpluses throughout much of the year led the farmers holding stock for longer. Whereas cattle traded was robust. In the South Island where tallies were slightly up compared to the prior financial year as drier conditions lead to increased stock turnover. Whilst pressure on sheep pricing is anticipated to continue for the current financial year, there is an expectation we'll see some robust trading across the major stock types as farmer confidence improves. We saw continued growth of our meat processor partnerships with increased volumes and terms negotiated with our key procurement arrangements. I'd like to comment briefly on several areas of innovation with the PGW leading to the way in developing new options and solutions for the farmer sector. The first is our GO-STOCK grazing program, which we've offered for several years there which has continued to see positive demand. GO-STOCK frees up capital for farmers allowing them to invest in other areas of their business. Robust returns were generated from that GO-STOCK program. It continues to prove to be popular with sheep, beef and dairy farmers -- and deer farmers. And I think we've just launched our first product to our big clients as well. So another business offering is our Bidr, our leading online platform for livestock trading. Our Bidr database of buyers continue to show a steady development. This growth is driven by continued demand on online bidding and live streaming of cattle saleyards and on-farm auctions, with especially strong demand in genetics markets. Last year, I think we've completed over 1,000 online auctions. We're a regular live streaming from 13 new saleyards and alongside our on-farm auctions. Better strategy is also reviewed and refreshed over the course of the year. New markets and user functionality will be explored in the next year to underscore the benefits that better can bring to agricultural markets and extend their auction footprint further. Last is SkyCount. Another exciting new offering. We've seen head under development, and we have recently launched the National Fieldays at Mystery Creek. SkyCount is a cutting leading edge solution for fast and accurate livestock auditing, utilizes advanced drone technology and sophisticated AI. SkyCount offers precise livestock counts while without impacted Gold farm operations, enhancing efficiency, reducing workload for staff and minimize stress edibles whilst ensuring reliable audits, particularly for the corporate farming entities. SkyCount integrates aerial imagery and AI software to conduct livestock audits at a new level of speed and accuracy and efficiency. This is an exciting new application for the technology that PGW is proud to be leading -- to be leading in which we believe over time will transform the better, which livestock -- on-farm livestock counts and audits are undertaken. We've got a brief video clip for the SkyCount's technology. [Presentation]

Thank you. The fact that we -- the story was picked up by some leading news outlets of New Zealand that don't normally take so much interest in the agriculture is what we might have something here. Moving on. Returning to operational summary. I note that the season delivered a degree of sustainability for growers with prices some wool types approaching 3-year highs, although a significant scope for value growth for wool rebates and industry priority. Merino will met steady competition from fine wool buyers with solid prices. Crossbred wool versus season with some positive signs. Our wool exporting subsidiary Bloch & Behrens Wool New Zealand Limited, saw an increased interest in our flagship Wool Integrity New Zealand brand offering, including some well down local brands coming on board. Excuse me. A review of the leadership and operating structure of our PGW wool business was initiated during the year. The leadership team have now been aligned and with a view to implementing a refreshed and future focused strategy for our wool business. It's been a particularly challenging year for the rural real estate market. Momentum in the market remains subdued, with farm sales significantly down on the prior year. The economic climate was -- has impacted farm and agricultural land prices and reduced a mismatch between vendor and purchase expectations. Sheep and beef properties has been slower demand due to lower farm gate returns. The dairy sector saw some momentum with increased interest in dairy properties listed following the uplift of the forecasted book price payout around December last year. Macroeconomic conditions have also impacted the lifestyle market. This has been clearly felt in the North Island. However, the South Island has held up reasonably well. Our share of the rural real estate market has held up despite the challenging conditions that have been felt across the country. Turning to the first quarter for FY '24, the current financial year. The winter period has been generally milder with good soil moisture levels across the country. Colder wet stats have plagued the provinces through September into early October, with several spring storms brew through. In particular, Otago and South Island experienced flooding, have are received a period to stay weak conditions leading up to these events. These conditions have required farmers to offload some stock to maintain pasture and assist in spread grass growth. There has been reports of widespread or significant lamb losses in these areas with morale negatively impacted. PGW is playing its part in supporting our clients through the various initiatives led by the Rural Support Trust and other industry bodies. Soil moisture have started to see some dry conditions in the eastern areas, however, in the North Island, which is as we head into critical planting windows. We're getting to see some indications of green shoots of recovery in some sectors, which is coming through the activity of the business. We have seen solid trading over the first quarter of the financial year. I should note we are now just entering the critical spring selling window for our retail business, and it remains early days. There is ongoing focus and efforts to control our costs. I'll now hand back to Garry to talk about the outlook.

Thank you, Stephen, for providing that overview. I'll now provide an update on the current outlook. Looking ahead, the rural servicing market in New Zealand remains relatively challenged. Geopolitical tensions are contributing to cautiousness in the markets. and a slower-than-expected recovery of the New Zealand key export market. China continues to dampen commodity prices. Sheep farmers are facing challenging market conditions and soft returns and sheep numbers are estimated to have fallen by about 4.3% down to 23 million sheep or breeding use and trading sheep stock numbers are also falling. The lamb processing season has got underway in recent days with all eyes on the export returns given the focus on the pre-Christmas processing for Northern Hemisphere markets for Christmas and for the Chinese New Year. The difficulties faced in the sheep meat market we brought home in recent times with the announcement of the proposed job losses and closure of Alliance's Smithfield Freezing works in Timaru. There are, however, a few positive indicators that I would note that suggest we are perhaps starting to see the start of a turnaround. Confidence has been returning to the dairy sector with Fonterra providing the market with further confidence during September, lifting the forecast milk payout ranges. This confidence is leading to increased inquiry and activity in our real estate businesses for dairy and for dairy support properties in particular. Beef prices are strong. With export demand supporting a positive outlook. We're also seeing a greater number of calves being reared as farmers look to meet this demand. Horticultural crops, so good quality yields in the past season with kiwifruit seeing some $50 million more trays than the previous year. While the grape, as Stephen mentioned, while the grape crop yields were back, they were of exceptional quality. These factors bode well for confidence returning to the horticultural sector as growers receive payment for their export markets. Given these mixed signals, and the fact that we remain in the very, very early stages of the key spring growing season, we remain cautious about the financial year ahead. Currently, we are forecasting an operating EBITDA for the year to 30 June 2025 of around $51 million. However, we will be in a better position to assess our forecast again after the spring period.

We will now take questions in relation to our presentation from shareholders or their proxies from the room and then online. And if you are present and wish to ask a question, please wait until the microphone is provided to you and state your name. So we are open for questions. Mr. Mander is here.

Thank you, Garry. Oliver Mander from the New Zealand Shareholders' Association. Look, I appreciate the comments you made around wanting to draw a line under the events, the corporate governance events early in 2024. But I guess it's certainly a little lasting impact around the wider market also. So I guess maybe a question for Agria really, but what are Agria's future intentions as a shareholder of PGW, what's their exit strategy? And how can retail shareholders help them achieve that?

Thanks, Oliver. And you're right. It is a question for Agria. However, they made a unilateral decision to call for a special meeting to remove 3 independent directors and discussions took place over several days. And that resolution was ultimately withdrawn and that withdrawal was welcomed. We saw a lot of media attention to it. And as you note, it did impact the share price. And I would add it didn't go unnoticed by our banks. But -- we have, as far as the current governance set is concerned, drawn a line underneath it. And I think it would be only Agria that could give you an accurate answer. What are their intentions going forward? I think that is impossible for me to expand on. I do not know. Some more questions. There was dead head. But you...

When you had the initial discussions in February, what did the proposers, what your technical information do they go on to bring to the business? And what you aspects of fruitfed business that we're going to bring the as an open to get was through their original directorship. In other words, what good were they going to do to the company's business?

Thanks for the question. Same answer for Mr. Mander, I don't know I don't know what good it was going to do. Other than they appeared to be handpicked for some purpose. And replacing 3 very competent capable people with a lot of knowledge of the business and commerce generally. That question is really a question for them. The only thing I would add is that we're a similar event to happen again. I think they would be hard pushed to find in New Zealand -- competent, reputable independent directors willing to accept their nomination. Next?

Max, my name, Garry, I'm a member of the New Zealand Shareholders' Association, but just remember at this stage. As regards to Agria Corporation, it might be advisable to favor to take on board the fact that this company is an iconic New Zealand company. And if they took on board the fact that many people who supported in the farming community would do so under its current situation and its current management and benefit from that accordingly, Not perhaps trying to make too much in the way of changes. But anyway, my question, however, goes on from that, and that is this in my traveling around the country side, I noticed that real estate business and the farm sales business seems to be dominated by the one [indiscernible] Bayleys. What is right PGG Wrightson got a plan to try and rest that percentage of the market away from them and back to PGGW?

Okay. Firstly, Max, thank you for your observation and then the question. And I'm sure that Mr. Guerin has an excellent response to that.

Thank you, Max. If Peter Newbold was here, I probably would have heard the question over to him because he is the real estate expert, but notwithstanding that. A couple of things from PGW's perspective. perception versus reality. We do -- real estate is one of those markets in New Zealand where there's actually very good transparency of data for the Real Estate Institute and our market shares from a rural real estate perspective, are actually higher than what the Bayleys are. Our -- we just complete some customer feedback. We do it on an annual basis, independently run, fully scientific, et cetera. And that depends gives us exactly the same results that we are doing better in the space in terms of delivery of results for our customers. Probably the mission of that in terms of what you're saying is that we're probably going to do a better job telling our story and giving a few more slides out there. But in terms of actual transactions, we're actually doing a good job on that space. One of the initiatives that we are doing from a business perspective. It's two additions, I should say. Firstly, in some of our locations, our real estate locations, we've had just for historical reasons, we've had them separated from our core businesses. We're really back and under the umbrella of the core business. That allows us close collaboration between the teams. Those locations are in the minority, but they do exist. And we have also introduced a staff referral scheme across the entire organization to help where they see prospects from a purchaser and a potential sale perspective as well. So that's leading to some leads. So that's just been launched about 2 months ago. So happy to answer your question, but I do take your message that probably we're going to do a better job telling our story. So, thank you.

Well, suits me gives us a longer period of time for morning tea.

Garry, I confirm there is no online questions.

Thank you, Julian, no online questions. Thank you online people. .

So what happens next here? We'd come to the formal part of the business. where there are some ordinary resolutions in relation to the election of 2 directors and authorizing the Board of Directors to fix the remuneration of our auditors. The resolutions and the accompanying notes that were set out in the notice of meeting. And as usual, we offer shareholders the option to cast their vote for the meeting via e-mail, mail, online or in-person here today. The proposed resolutions will be determined by a poll, that will be undertaken by our share registrar, Computershare. The first resolution. The first resolution relates to the reelection of Dr. Charlotte Severne as an independent director. Charlotte's biographical notes are set out in the notice of meeting, and Charlotte joined the PGW Board on the 18th of June 2021 and being eligible offers herself for reelection. And as I noted at the outset of the meeting, unfortunately, Charlotte can't be with us today. However, she has sent me the following note: Sorry, I can't be there with you today, but I wanted to say a few words. I'm very honored to be standing again for PGG Wrightson. The company has managed to perform well with challenging headwinds in the ag sector. I'm excited by the innovative products and opportunities that are being progressed across multiple business units in the organization. I believe I have more to contribute to this wonderful company and its people, and thank you for your support and hope I get to represent you all again for another term, Charlotte. The company's directors wish to note the specific expertise and experience that Charlotte brings to the Board as noted in her biographical notes, and we recommend that shareholders vote in favor of Charlotte's reelection . Resolution 2. The second resolution relates to the reelection of U Kean Seng as a Director. U Kean's biographical notes are also set out in the notice of meeting. He has -- he is a current director and joined the PGW Board on the 4th of December 2012. And U Kean Seng being eligible, offers himself for reelection. The company's directors wish to specifically -- sorry, I wish to note the specific expertise and experience that you can see brings to the Board, as noted and as noted, and recommends that shareholders vote in favor of his reelection.

Sorry, I've got a bit of a problem with my glasses. Who was first there? David? Go ahead.

David Tennison shareholder. Now I noted on Page 102 of the annual report, there's been a slight change in Mr. U Kean Seng's position. He was Agria Corporate -- he was a head of Corporate Legal Affairs at Agria Corporation up until December 2023. And now presumably, he isn't. So I guess my question is, how does this change in status going to affect how Mr. Seng conduct his affairs as a Director of PGW because clearly Agria as a cornerstone shareholder. And clearly, in the past, Mr. Seng has been a direct link to that company. So I'm just interested to know how is that going to work in the future? Is he still going to be -- well, as an example, presume he's not going to be in contact with Mr. Lai as often as before, for instance. So I'm just wondering how this is going to affect us directorship of PGW.

Okay. Thank you for the question. I can't comment on your assumption or presumption, but I will invite Kean Seng to respond shortly. What I would say is under the NZ Stock Exchange, code of governance, the fact that he has worked for Agria in the period immediately prior to that change of status. He is still non-independent. And also the fact that his tenure has gone beyond 12 years. That's also a condition of independents and he would be deemed nonindependent for that as well. But if he wishes, I would invite him to respond on the second part of your question, which is how often will we be speaking with Mr. Lai, I think it was the question, put a different way.

Thank you. Thank you for that question. The fact that -- I think what Garry has said about classification of independents or nonindependent. I think that is correct because of my previous association with Agria that I would not be considered as an independent director. . But as someone that have represented Agria and also sitting on the Board of PGW for that number of years. I have enough very good experience in terms of knowledge to be able to contribute as a director. And I also would like to take this opportunity to clarify the NZ shareholders' associations letter, I think, to the shareholders that I remain as a representative of Agria, that is not correct. I have retire from my position as the General Counsel for Agria since December 2023. So I will continue to contribute as a director. I think the fact that I have experienced and knowledge of Agria as well as the company's business. I think I could play a very positive role in contributing and breaching the gap, that independent directors who are not familiar with Agria and have no director relationship with Agria that I can be a very good bridge. And as to your question, how often do I remain in contact with Agria? I think the Chairman of Agria remains a very good friend. It's been a personal friend of mine since university. So I think that friendship, I think, can be a very good and positive end of factor helping the Board and the company to stay connected with Agria and Alan Lai. Thank you.

Thank you for that thoughtful response, Kean Seng. Oliver?

I'd just like to thank Mr. Seng. It's good to hear. I know people have mixed views about Agria being involved in the company. I don't want to get into that at all. But the fact is they are a very important cornerstone shareholder. I think it's very important that the Board keeps in touch with them, keeps that communication channel open. And I'm pleased to hear that sounds though through Mr. U Kean Seng we'll be able to do that. So that's good news. Thank you.

Next one.

And look, thanks to Kean Seng for clarifying the situation around the relationship with Agria, that is helpful. Just one specific question in relation to that first another question also. So did -- what's the change in Kean Seng's in relation to Agria indirect response to the judgment calls made in relation to the corporate governance challenge that was received earlier this year. So that's the first part of the question. Look, I guess the second part of that -- there is some association there. That is very clear, given the poor judgment made by Agria in terms of chasing all the actions that took earlier in the year at that point what value does Kean Seng Director in his own right in terms of those corporate governance issues. And what does that say about the judgment that he displayed as a director at that time?

Would you like to respond? Kean Seng? We'll get you a microphone. The first part of the question was the change in status a consequence of what was happening with regards to the acquisition? And the second part of the question was what does that mean now in terms of the skill set you bring to the Board that might not otherwise already be there.

I think as I have said previously that I do have a very close relationship with Agria and Alan Lai. But the fact that I'm not member of the executive team of Agria. I was obviously not a party to that decision of Agria in February. But having the friendship and relationship with Alan and Agria I think as the Chairman vote can testify, I did play a very proactive role in terms of helping the party to resolve the impact. I think that -- the outcome of Agria withdrawn is resolution, I think, speak for itself. And I think they continue to very good testimony of my ability to bridge the gap between shareholders and to the Board. Thank you.

Thank you.

And sorry, just the second part of that question, Kean Seng in terms of if that relationship is no longer there, can you expand on the value that you add to the Board in your own right?

Can you repeat that again?

Just in the absence of any ongoing relationship with or formal relationship with Agria, can you expand on the value that you add to the Board in your own right?

In terms of value and our ability to contribute on at the Board level, my knowledge about the company and the business and my relationship with the executive team is a very good factor in my ability to contribute. And obviously, apart from my relationship to understand the aspiration of major shareholders that also is helpful.

Thank you for both the questions and the answers. I would just add a little bit of color to the interchange. We'd acknowledge that Agria are an important shareholder, 44 -- over 44% shareholder, which does give Agria the legitimate right point under the current structure of 5 directors, I would say 2 legitimate appointments. And I think to Agria otherwise, just because of what went on to Agria otherwise would be a little churlish. So I share your inquisitive question. I'm not too sure of the relationship. I think you can see in his answer it honestly. He's told you of his friendship with Alan Lai. I'm just not sure what Mr. Lai will be thinking in terms of official representatives of Agria, if I think that made sense. . May we have some more questions I've got one more thing to do, even. Okay. Right.

The third resolution. The third resolution is to authorize the Board of Directors of the company to fix the auditor's remuneration for the financial year for the purposes of Section 207S of the Companies Act 1993. As is usual with audit fees, it is impractical to fix the remuneration at the beginning of the year. Accordingly, the Board of Directors are seeking authority from the shareholders of the company to fix the audit fees at the appropriate time. So thank you for that. I'll now move that resolutions 1, 2 and 3 you set out in the notice of meeting by way of the 3 separate motions. I'll move them as ordinary resolutions. A poll will be conducted in respect of the resolution. For those who have not cast their votes already, please do so now by clicking on the vote tab on the right side of your screen. For those present who have not yet voted, please complete your paper and pass them or to Computershare will come and collect them. We'll collect your voting papers in the room or you may hand it to the representative at the registry table by the door where you entered. [Voting]

That concludes our discussion on the items of business, and I'll now close the online voting system. No. When does that close, Julian, is that closed now?

You open for any more questions.

Oh, to open for any more questions. And I'm happy to address any further questions from the floor. While we're waiting for that to happen. So I will now declare the voting closed. We've got one from [indiscernible]. And invite questions. So leaving -- can I leave it open for a little longer?

Yes.

Okay. The voting has reopened and hurry up and vote if you haven't. [Voting]

Dave has got a question. David?

I had a question. I wasn't sure whether to ask it at the end or during the result discussion time that basically, it's been a fairly tough year for the company, as I think everyone knows. And last year, I asked sort of a bit of a pie in the sky question about banking covenants and things. And I wasn't going to particularly clear answer, but I thought I'd have another go. And I'm thinking at 2025. Now I know these banking covenants are something normally between the company and the bankers. But not believe or representatives here. But they may miss to comment as well. But one of the areas that I believe has looked at is the ability of the company's cash flows to cover their interest payments in effect, and although we haven't released these statistics, I can make an educated guess that with your revised EBITDA forecast for 2025. I'm of the opinion that it is likely that any surplus cash flow will probably be going to retire more debt. And even at this early stage, you'd probably be at the situation where you can tell shareholders news, they don't really want to hear and that you've canceled the final dividend for 2024, and I understand the reason for that. I think you're probably also at this stage have to cancel the interim dividend for 2025 as well. I know it's early in the year, but I can't see any way out of that. So rather than giving shareholders a false hope I'm wondering whether you could just clarify that, that is, in fact, the case.

Delighted to -- before I hand over to the CFO, Peter Scott, I'll make some comments on what your observation means. The first thing I would say is that we have an excellent relationship with our banking syndicate. You will note that we've actually, during a period of hard times had an extension credit terms because of our desire to grow the GO-STOCK product, which I'm reluctant to call it financing, but it's a product that needs financing, and it's a good part of the business and an integral part of the business. And we managed our cash flow very, very carefully during the year. There are many components of dividend policy. You're right, cash flow is a key consideration as is CapEx and OpEx. And we're going through a period of a major IT upgrade that is eye-watering in its costs. And while that was happening in the face of the downturn last year, and rising interest rates, I might add, at the same time, it was prudent to curtail dividends. Now the other thing you mentioned about EBITDA, the bank doesn't use the EBITDA that we use. The bank uses a thing called frozen gap, which is slightly different. It takes off lease payments as well. And as a denominator that can be quite a constraint. But we haven't reached any banking covenants. One thing that has changed, however, is that the banking syndicate has taken more of a seasonal approach to some of those covenants not all some of them, which is sensible because where we're heading into periods of time, I think it peaks near December, December, January, having a static figure as a covenant is crazy when our debt can go 3x higher in the peak of the season. And at the end of June, I think if you took off the GO-STOCK, you said the number, I think we only had about $6 million of debt at the end of June. And we're well within those. It's not appropriate to reveal what those covenants are because they're commercially sensitive and some of our competition would love to know how much more money we've got in the [indiscernible]. And as regards to dividends, that's a decision for the Board. Paying dividends is easy when you got net profit after tax, you see we didn't have any. That was what we were expecting to see. And we managed it sensibly prudently, and we will act in the best interest of all shareholders to try and restore dividends as and when it's prudent and appropriate to do so. Anything to add, Mr. CFO?

Probably just two things.

Sure.

You've covered it well, Garry, the answer. I guess just to clarify, so we've got normal covenant ratios, basically leverage ratios, which are based on our debt over our EBITDA, which you talked about, Garry. But the analysis that you've done, David, is really good because the other one you're talking about is our fixed cost coverage. Now the only comment I would make there is that we have controlled our working capital very well. So our inventory, for example, is lower. Our EBITDA -- so the denominator for 2025 going from 44%. And I know that's not frozen gap, but a few -- I appreciate it's going from 44 to 51. So the denominator is certainly helping us a lot here will help through 2025. And the other point is that interest rates of the OCI continues to drop, should actually reduce as well. So our cost, in other words, our numerator should actually come down as well. So I think we've probably been through the most difficult part. And now we're actually -- we should be looking forward to meeting those covenants and reasonably comfortable method actually so.

Okay. Well, first of all, I'm very pleased to hear that the banking syndicate appreciation seasonal nature of the business because I think that's something I wasn't fully aware of. So that's good to hear because although the banking syndicate has obviously -- can you hear that? Is that right? Well, the bank, that's better. Although the banking syndicates obviously keen to support the company. I don't think they're keen to be long-term owners of the company if they have to open the grease and say, Well, I'm sorry, boys are going to take over. So I'm pleased to hear this relationship's good and long may it continue. But notion you sort of talked around the dividend question. I know there are a lot of balls in the air, but I still think you're going to struggle to pay the next dividend. So I just like to warn shareholders not to get to enthusiastic about the dividend returning immediately. That's all I want to pump expectations that are unrealistic. I guess that's it all I've got to say on that.

Thank you for the observation.

Sir, did you have another question? No?

How the count is going?

You can close the meeting anyway. And then that computer shareholders complete the vote and perform me afterwards. That's what we usually do.

Right. So how will they know it's closed?

They will disclose the vote.

Okay. Sorry, I'm not too familiar with this high-tech means of voting. In the old days, it was just that. Okay. I don't -- as a courtesy, Mark, would you like a question? You probably would have asked it already.

Dividend question was one on in moment. But I guess, as a shareholder, our view clearly understand the situation in terms of paying dividends out of debt is something that we at all. So bets more around capital growth for the next period until we get in a position where there can be a disease. And so we look at an were -- our company, we overstate cycles. quite passionately looking forward to stability, still looking at the internal issues around the IT system and then we operating environment. So no question sorry, Garry, for the second question.

No. Well, thank you. It was a good prompt actually because I admitted something I should have said because over the last couple of years or prior shareholders well know, dividends were extremely high to the tune of almost all of the net profit after tax was paid out. And I recall 2 meetings ago, there was a question from the floor, a gentleman shareholder -- want why you're paying all these dividends. Why don't you retain some of these earnings and grow the company. Now it might not be much a surprise to the more analytical people here that those dividends pay out over that period. Equated approximately equal to the escalation in depth. So personally, although I speak for the Board or tell you personally, I don't think it's wise to borrow to pay dividends. And as we manage the cash flow as we retain earnings as we complete this IT transition. And as we have some clip-on components to the business that we're looking at, whatever the CapEx requirements of that are we should have left over something that we can call a dividend. And we look forward to the day of perhaps pleasantly surprising you, David. I'm going to close the meeting now. I think that's fair. In lieu of the lack of dividends, there's some good sort of roles out there you can have 2 instead of 1. Thank you for your attendance. I know it's early and cold out there. And we do appreciate the support we get from our shareholder community and the professionals in the room. So thank you for coming.