Wynnstay Group Plc (WYN) Earnings Call Transcript & Summary

Welcome to the Wynnstay Group Full Year 2022 Results Webinar. [Operator Instructions] This webinar is being recorded. I now hand over to Gareth Davies, CEO; and Paul Roberts, Finance Director. Gareth, over to you.

Thank you, Tamzen. Good afternoon, everybody, and welcome to the presentation of our annual accounts. I'm Gareth Davies. I've been CEO since 2018. I've been with the business since 1999, previously Head of Agriculture. My background really is the commercial sales and commercial sales management. And over to Paul.

Good afternoon. I'm Paul Roberts, [indiscernible] years’ experience, generally our career led [indiscernible].

So for those who are familiar with the business, the background to our business is that we're a business about supplying farmers and [ customers ] [indiscernible]. We started in 1918, and here where we are today on the borders of Wales and Mid-Wales that started as a [indiscernible] market in 2004. I often use a phrase when people ask me, so what does your business do. We [ sell ] both livestock and arable farmers to produce food in a sustainable way. Our strategy is based upon [indiscernible] [ agriculture ] inputs. -- We don't supply tractors or combine harvesters, and our business is based within AIM and GB [indiscernible]. We have a balanced business model. And what I mean by that is that we supply farmers, [indiscernible] arable farmers, which in a way [indiscernible]. You may be aware of the term horn v corn, well you'll sometimes find that arable farmers are doing particularly well if the price remains high. Whilst at the same time, maybe livestock farmers aren't doing quite so well because that grain that the arable farmer sells will be used in feed that the livestock farmer buys and vice versa. But this natural hedge does enable us to deliver consistent results. As a business [indiscernible], I will go through more detail later in the presentation. But we report as agriculture, which incorporates feed, arable and Glasson Grain Limited and also Specialist Agricultural Merchanting. In the 53 depots that we have are Youngs Animal Feeds, in addition to that. I will give in more detail of the sectors later on in the presentation, and there is also further information available in the appendix. We have a number of routes to market, how we deal with our customers. It's either come into the depots to collect product. Product can be delivered to farm. We have a point of difference in many of our sectors that we deal in, with expert advisers, individuals, our representatives who would call and farm to discuss business by appointment. We have a number of specialist catalogs, dairy, poultry, beef and sheep -- a small digital offering as well. This slide here gives you an idea of where we're based and our geographical reach. The left mark is an indicator of where our manufacturing sites [indiscernible]. The green circles indicate our fertilizer blending operations from Montrose up in Scotland, into East Yorkshire and into Lancashire. The red circles, are feed operations. And then actually on the western side of the country, we also have one seed plant at Shrewsbury, which is the purple circle. Just to give you an idea of the scale of the business, we've got 970 people as employees. On the indication of the blue color is the darker the blue is where we're more intensive, where we have more market share. And quite naturally, that is where we started right in the [ borders here ] Of Wales. But over time, we've been able to expand the business, not all the way across the U.K., but certainly, in most areas with the exception of the Southeast of England and various parts of Scotland. We run our own commercial fleet. We have about 110 commercial vehicles. On the right-hand map will indicate to you where our depots are. 53 depots are mainly on the western side of the country because the model that we have in the depots, which we'll cover a little bit later on, is very much in the livestock sector. The livestock have plants on the Western side with arable on the eastern site, and the 3 green circles are the 3 depots at the other part are Youngs Animal Feeds. So if I just cover the operational highlights for the year. I'm very, very pleased with the performance of the business. We've had another record year, and very importantly, we have seen significant strategic progress which we made throughout the year. The strong trading performance has certainly been helped by a favorable trading environment for our customers, our farmers. 2022 overall and was a good year for farmers. Picking out a couple of highlights of the year for the business. GrainLink, our crop marketing business, achieved a record performance with volumes up 31% on the previous year, and we've also had good margins as well. Glasson Grain performed exceptionally well. This did include the fertilizer division delivering significant one-off case. But again, we'll give you more detail later on in the presentation. And also our joint venture businesses. They performed well. We have a number of joint-venture businesses, which includes the agriculture, supplying feed farmers, [ and that had ] a lot of record performance as well. The strong financial position of the business has certainly enabled us to continue to deliver our growth strategy. Humphrey Feeds and Pullets was acquired [indiscernible] acquisition, aligns very much to our strategic -- strategy and ambitions and at the same time has given us increased geographical coverage. This was also followed at the end of the year in November by a further acquisition of Tamar Milling in Cornwall. And we continue to invest in our manufacturing capacity. Manufacturing is also key to the growth of this business. Investment has being made in seed at our plant in Shrewsbury. This has doubled the grass seed capacity and also at feed, the project at Carmarthen mill had started in this year and will be completed next year. That project is also underway. These are strong results, but they will not be repeated this year. However, the underlying performance of the business has been exceptionally strong, and our business model of supplying products, as product services [ underwrites ] our balanced-business model, to both livestock and arable farmers has again helped us deliver this performance, and we are well placed to build the business and to deliver our strategic ambitions as we go forward. I would now like to hand over to Paul to cover the financial key points.

Thank you, Gareth. So just the financial highlights of the year. A quick reminder that our business model is what I'd like to refer to as an absolute unit margin model. We tend to price our products on a margin per tonne or per unit of the category that we're referring to, whereas our revenue is actually fairly volatile depending on underlying commodity prices, the majority of which we have little control over because they are globally traded activities. During the year, we saw a particularly volatile period for worldwide commodities. Obviously, macroeconomic events and global uncertainty created considerable inflation in a lot of the activities that we're involved with. So of the GBP 213 million overall increase in revenues, we've actually attributed an estimate of about GBP 180 million of that is related to underlying commodity inflation. So last year's volumes at the previous year prices would have meant that this year's revenue would have been GBP 180-odd million lower. During the period, we had a very significant acquisition, the Humphrey's poultry business, which was acquired in March '22. So we had roughly an 8-month contribution from that business, which brought in a further GBP 32 million. But these figures do mask the underlying performance, where we did experience positive volume variances in important categories, not least the grain trade and activity that Gareth's already mentioned, but also very importantly, in manufactured feed, which is a very strong category for us. This was offset by lower volumes in fertilizer, where the high prices obviously acted as a deterrent to some farmers, particularly on the grassland activities, and we experienced lower seed volumes. We have reported a near doubling of underlying profits but highlighted that this includes a number of one-off gains. So the obvious question is, what is the quantum of the -- what we are classifying as one-off? And while this isn't in an entirely straightforward question to provide a simple answer for, I would refer you to those one-off gains that we are highlighting and the activities from which it's come from. They're mainly in our fertilizer activities, where our financial year started with initial increases in natural gas prices caused by our increasing tensions. You perhaps recall the CO2 shortages and [ as a result ] of the reduction in fertilizer productions from which CO2 is produced for the food industry. This was then exacerbated by the commencement of the war in Ukraine in February and then indeed continued into the second half of our financial year with disruption and tensions growing, particularly between Europe and Russia and the issues with the gas pipeline. All of these created spikes in prices of fertilizer commodities from which our Glasson business, being a manufacturer of fertilizer products, benefited from the stock gains. Our estimate of that overall combination is around GBP 9 million. Towards the year-end, again, volatile prices for wheat created another one-off gain of around GBP 0.5 million. So in total, about GBP 9.5 million is our estimate of what we're classifying as the one-off elements. Clearly, the higher profits are fed through to our earnings per share and indeed contributed to a strong cash performance at the year-end, which was enhanced by successful equity placing that ties in August to support our wide investment plans for the future, more of which you'll hear about later on in the presentation. We're very pleased again to highlight our progressive dividend policy, where for each 1 of the 19 years that we've been on the AIM market, we have been able to report increases in our dividend, a further 10% rise this year to a total of 17p for the year. The graphs on this slide, really, are just demonstrating the record performance on all financial metrics. The business model, our absolute unit margin model that I've already mentioned really suggests that, that gross profit chart is the key KPI indicator for the underlying performance of the business. And you can see the 33% increase in that metric in the year is the driver of the bottom line results. And obviously, that increment includes the one-off gains that I've already mentioned and also an approximate GBP 5.5 million contribution from that proportionate result of the Humphrey's acquisition. Just quickly looking at the financial statements for the year. It's important to bear in mind that we are comparing like-for-like for the acquisition. I don't know if you can -- sorry, about slide issue there. The income statement, obviously, I've talked about the revenue, our gross profit. But I suppose a factor that everybody is well aware of, input cost inflation has clearly been a challenge for the business and will continue to be a major challenge in the new financial year, where costs, particularly labor, energy and distribution will be a challenge going forward. And obviously now including our finance costs with increases in our interest rates after a period of very low finance costs, it's obviously a factor for us going forward. Moving to the balance sheet. Again, we like to highlight the asset-backed nature of Wynnstay. We have our total net assets equating to something like GBP 6.30 per share, inclusive of goodwill on the balance sheet, but also a substantial freehold property portfolio, which is contained in this balance sheet as historic costs. A recent valuation that we have done during the last financial year highlighted around about GBP 10 million of difference between the carrying value in this balance sheet and the current market values for those operating locations. So again, just another emphasis on the asset-backed nature of the business. But the main story from the year is one of working capital. The inflation that we've talked about has created a working capital challenge, which I believe we've managed extremely well. But you can see from some of those individual numbers, whether it's stock, whether it's debtors, there have been some substantial increases. We have to fund effectively around GBP 16 million worth of additional working capital. If we look at the cash flow statement, you will see that this is actually being financed from very strong cash generation, which you'll see was approaching GBP 14 million. And again, I'd like to demonstrate that best on the next slide, which is a good old-fashioned net cash, net debt reconciliation. So you'll see our profits in cash terms, EBITDA of GBP 28 million, inclusive, obviously, of the one-off gains that I've highlighted. You'll see the working capital outflow that has been financed from those cash profits and where we've actually invested that activity. Reconciling down to the net cash position at the year-end, both in accounting terms of GBP 14 million, but more importantly, after excluding property leases, which are classified as debt some GBP 18 million on a definition that the bank is interested in for covenant purposes. So again, a very strong financial year-end, which we do acknowledge is always exaggerated because it does represent the best of our annual basis. Those are just basically the same numbers in pictorial form. So if we look at the cash cycle for the year, I like this chart because it demonstrates the predictable nature of cash generation within our business. I've mentioned that our October year-end is the trough of our cash utilization requirements, which actually peaks with our interim results in April. And you can see the predictable seasonal swing from that. I've allowed this chart to go back some nearly 10 years just to really demonstrate the trend line, which I think shows both the growth of our business, but also the scale of our activities over that period underway that they've actually grown the way that we've been able to fund that expansion without any real challenges. Finally, from me, on the segmental analysis, we'd like to use this slide to demonstrate that balanced nature of the business Gareth's previously mentioned, our 2 main divisions there, if we can grow both of those segments as shown by the pie charts proportionately, our business model is designed to create equal contributions from the 2 divisions. You can see that that's been clearly distorted in the last financial year because of those one-off issues that have been recorded and reported in our Agricultural division.

Thank you, Paul. As an introduction to the Agricultural division, I'll give you an overview of the agricultural environment. So the Ukraine war has certainly an impact on both farm output and farm input prices. The top table on the right-hand side relates to farm outputs. In other words, what farmers have had the product. And the comparison there is a start and a year-end. And we've certainly seen during that period of time, the majority of farm commodities have increased in value, with the exception of oilseed rape and lamb which has been fairly constant. Grain prices certainly finished the year considerably higher than the beginning of the year. And also during the year, grain prices went significantly higher than that to the top of about GBP 340 per tonne. And whilst milk prices have reached record levels of late December and early January of 50p per liter or thereabouts, this has now started to fall off as supply started to outstrip demand. The bottom table demonstrates farm inputs. We've concentrated here on a feed, fertilizer and fuel. And you can see the increase in the year there. Post year-end, some of these commodities have started to fall off. In agricultural inflation in general, we've taken 2 positions of comparison. One in September 2022 with in comparison to the previous year. And right across agricultural inputs, agricultural inflation year-on-year was 32% at that stage. Whilst this has actually come down slightly for January -- or considerably for January, rather, comparison in January, I mean last week in the case of 17%. So what that indicates really is the amount of money that our farmers have had to come across to be able to run their business. But overall, 2022 has been a particularly good year for the agriculture, probably with the exception of the free-range eggs sector, which has suffered from margin erosion, but that sector now is coming back to as feed prices have started to fall and egg prices have started to go up. Our feed division. This in itself provides a natural hedge. Why do I say that? Because we produce feed for dairy cows, beef cattle, sheep and also free-range hens. So that gives us our internal hedge again. During the year, we have significantly increased our presence in the U.K. feed sector. Like-for-like volumes of organic growth was 6%, an increase of 6%, particularly pleased with the progress that we have made in the dairy sector and the free-range egg sector. These areas are areas that we've targeted, sectors we've targeted as part of our growth strategy. Our dairy volumes increased by 6.9%. Against a national trend -- information provided by consulting, the dairy volumes actually dropped 1.5%. So we certainly gained market share there. However, margins were impacted during the year as a result of raw material volatility and also increased cost, particularly fuel where we weren't always able to pass on those costs may be quite soon enough. The Humphrey acquisition has certainly increased our market share of supply and feed to the free-range hen sector. Our market share has gone up 6% to 11% as a result of this acquisition. We're particularly pleased with the acquisition ahead of our expectations as far as the contribution is concerned, and it is pleasing on the basis that the sector has been under pressure not only from margins but also from the impact of avian influenza. Since the beginning of October, about 1 million birds have been culled in the free-range sector as a result of avian influenza or bird flu. Our commitment to working with our customers on the food chain in general to reduce carbon has certainly been enhanced by the introduction of a climate-friendly range of ruminant animal feeds. This range of feeds contains raw materials, which has been sourced from a sustainable manner, grown in a sustainable manner and also includes a methane inhibitor to reduce methane. This product has been approved by the Carbon Trust. It reduces methane about 10%, whilst at the same time, increases the efficiency of milk production and feed conversion in beef animals. Our sales have increased by 34% year-on-year. But looking forward, we do believe that milk and meat processers will insist that those people who supply into the chain, their farmers will be asked to feed their animals on feed, which has been sourced from sustainable resources and grown in a sustainable way. And we're certainly in a good position to be able to supply feed into those customers. Investment in our feed manufacturing is key to us. The 6 plans that I talked about earlier on, this will increase capacity for us. We have started the investment at Carmarthen in South Wales. This is a GBP 6 million investment to double the capacity of the site, and that will be completed in the first half of 2024. And also the redevelopment of the [ moth-balled feed ] [indiscernible] purchased, we are now in the process of coming to a conclusion, and the options that we have for the site and progress will start certainly during this financial year. That will give us 3 multi-specie feed mills. Well located geographically. We'll be able to service our customers with quality feeds, but very, very important it will be produced on a local basis. What that will do for us is it'll reduce our cost of delivery. The increased volumes will be able -- will enable us to increase our market share per basis. And at the same time, reducing feed miles which will contribute to the reduction of carbon for our customers. The arable sector has done an excellent performance, particularly in view of the December and the dry spring, and that certainly impacted the sales of some products such as grass seed. GrainLink, our marketing -- crop-marketing business, which I referred to earlier on, 31% increase in volumes. And that is based on a year before that we had a significant increase from the year before that. And whilst we compare that with market share, we've certainly increased market share. And whilst there was a good harvest, the harvest of 2022 was 11% up on the previous year. Our market share gains has come in the eastern parts of the country, and this was an area we have certainly targeted as part of our strategic plan. Fertilizer sales volumes in Wynnstay Agricultural Supplies were reduced. They were impacted, particularly in the livestock sector from the increase in price. However, contribution from the sector to the business has been strong as a result of increased margins. Certified seed sales, cereal sales were reduced. This came about as a result of a good harvest, an early harvest and a good quality harvest enabling farmers to effectively save some of the seed that they produce for sowing in the autumn period. This doesn't happen every year. But the difference this year was there was an early harvest, which gave them sufficient time to be able to do so. And at the same time, based on the cost of grain, cost of seed also went up. So that reduced our sales by about 19%, but we also made the commercial decision to exit some low-margin wholesale trades. The highlight of the year for arable farmers in the West Midlands is the Wynnstay Arable Event. This returned after an absence of 2 years, absent because of COVID, a very, very successful event attended by 800 farmers, and it is a key event in our marketing calendar for the business. It trades the business well and showcases what we do in the arable sector. The doubling of the grass seed mixing capacity at Astley will allow us to grow both our conventional grass seed sales and also an environmental seed offering. Farmers are now seeking the opportunity of sowing both the herbs and pollinators on particular marginal land and also to integrate diversity into the arable and livestock rotations. Government support schemes will reward those farmers who adopt greener-farming strategies. U.K. agriculture is certainly changing post-Brexit, and we will continue to collaborate with seed breeders to make sure that we are in a position to be able to offer our customers the highest quality products and cutting-edge advice. Glasson Grain is our subsidiary business based up in Lancashire on a small dock in the River Lune at Glasson Dock. We do run the business as a subsidiary, we purchased the business in 2006. The business has an exceptional result. And in addition to those one-off gains from fertilizer trading that as Paul referred to earlier on, the underlying performance of the business was very much in line with our expectations. During the previous year, we acquired a site in [indiscernible], the fourth of our fertilizer manufacturing plants, and that has certainly contributed well in the -- and while sales have been impacted by the increase in fertilizer prices. I am particularly pleased with how the management of Glasson has managed the fertilizer business through a very volatile trading period. There was also a strong performance from the raw material trading operation, which again managed that volatility particularly well with good volumes and also increased margins. However, within the business, the corn mill, the operation which manufactures specialist feeds. And the rest of our business, our feed manufacturing plants produce feed for larger farm animals. We have a plant at Glasson that producers feed for our wild birds and smaller animals. And certainly, volumes in that sector of the business was impacted by the consumer spend crisis. People stopped feeding birds basically and volumes as a result of that came down. But as we move forward, the business is in good shape, and we will concentrate on our core activities by seeking further efficiencies, particularly within the specialist animal feed operations and to seek opportunities to expand our successful fertilizer blending operations, particularly in the southern part of the U.K. Specialist Agricultural Merchanting, our depots -- in our depots, the of 53 depots that we have are very much similar to a builders' merchant really, but 80% of the trade that comes through with farmers, business to business and to the balance as anybody can come and purchase from there, whether it be a [ cattle ] or card. But they still remain a very, very key route for us, particularly within the livestock sectors. Very strong performance in the depots. Revenue was up 5%, which in relation to agricultural inflation would suggest that maybe the number of items sold through the depots was lower. Certainly, our sales were impacted by agricultural inflation, particularly discretionary spend was reduced and also the dry summer reducing sales of products such as animal health, crop packaging and also hardware such as fencing materials. But we're particularly pleased that the contribution from the division increased by 11%, which was a result of efficiencies, particularly in relation to distribution and the depot optimization program of closing one small depot at Bethania in West Wales, but we also saw increase of higher-margin products such as animal feeds. We make the feed ourselves, we distribute it, we've brand it in our own bags. And therefore, we are able to capture more margin. And we're certainly pleased to see an increase in sales for the depots of our own feed. We now have 2,300 customers who operate our digital portal. The majority of the customers on the platform, however, use it seek information and also to pay their accounts. They don't actually purchase too much online. Previous surveys that we've done with our customers and noncustomers still suggest that farmers prefer to either come to our depots or deal with our specialists on the farm. However, we will continue to build the platform to encourage our customers to trade online should they wish, whilst at the same time, communicate with people, either via social media or podcasts. Providing added-value service is certainly paramount to us, to the success of the depots, and we will continue to invest both in the premises and also the training of our employees by increasing the number of qualified advisers that we have, particularly in key product areas as such as animal health, nutrition, crop and hardware. ESG is a key pillar in our strategy. We appointed a sustainability manager back in 2021. And in support of Lewis, we have now engaged a sustainable farm advisory team, consisting of experienced industry experts to help advise us on the delivery of our ambitions. This is a team of 6 people. It includes people such as Philip Wynn, who is the Chair of LEAF, Linking Environment and Farming, an organization that is particularly strong on engaging the urban community with farm open days. He also acts as a Director of Dyson Farming that you may be aware of. And Tom Gill, very much involved in the sustainability of Arla Foods, will be one of the largest [indiscernible] processes in the U.K. and in Europe. We are moving forward with ESG, and we will be preparing a full TCFD report, which we will be included in the 2023 annual report. But as a business, we have an aim to become carbon neutral by 2040, and we are making progress. An example within the business that we have, is that on those 53 depots, 90% of them now have LED lighting. The rest will be rolled up during this financial year. And this has already saved as 50% in terms of electricity use. We've also agreed to install 1 megawatt solar panel system across a number of our sites and an investment of GBP 1 million, and this is the first stage of a multisite investment rollout of renewables solar panels over the next 3 to 5 years. But also important within ESG is how we work with our customers, and we are developing a Holistic Whole Farm Solution to help our farmers, both arable and livestock farmers, to deliver their own environmental outcomes through products and services, such as nutrient management plans, working with our farmers to identify what is the right amount of fertilizer in conjunction with farm yard manure to apply to the land to ultimately grow the crop and also the sources of raw materials that are grown or produced in a sustainable manner. Our aim is clearly to become a carbon-neutral business. Coupled with a sustainability strategy, which supports our customers to become more efficient in the production of food to help the farmers feed the U.K. in a far more sustainable way. So in summary on the outlook. Whilst our performance has been boosted by one-off gains, it has been an excellent performance on the group. Our strong balance sheet and financial position has certainly enabled us to further invest in our strategic plan. We have also raised funds that will need less to invest in our production facilities and very importantly enable us to continue with an M&A strategy to increase the scale of the business. We are very pleased with the acquisition of Humphrey Feeds and Pullets and thereafter Tamar Milling in Cornwall, an acquisition that took place in November. This is a feed business in Cornwall, it blends feeds. It gives us a new customer base. It has a very well-respected renowned brand and also a strong management team that will continue with the business, and at the same time, give increased geographic coverage. Announced to the number of specialists that we have in farm, particularly in ruminant sector. However, the cost pressures on the sector remain. And whilst input prices have started to fall, some farmer [indiscernible], particularly grain and [indiscernible]. While this will be a challenging for some of our customers, our programmed balanced business model will certainly help us mitigate any variances in sector profitability. We are now 3 months into the new financial year, and trade is very much in line with expectations. Our group forward is a clear vision for this, and we are very well placed to be able to achieve our ambitions, not only for this year and for the short term, but also beyond in line with our strategic plan. That brings me to the end of the presentation, and we're more than happy to take questions.

[Operator Instructions] And we have a first question. If property, which is on the balance sheet at cost, were to be included at current market valuations, what could impact the [indiscernible]?

[indiscernible].

Did you consider buying Carrs agricultural business before it was sold to Edward Billington? And will the deal increase the competitive pressure facing Wynnstay's business?

If we considered buying it, well, basically, the background to -- that was a joint venture between Carrs and Billington. And I'm not aware that publicly it became available for sale. I think it was obviously sold to the other partner. And second part of the question, sorry?

Will the deal increase the competitive pressures facing Wynnstay's businesses?

I don't believe so. The Carrs-Billington joint venture has remained as it was previously, and we operate in certain areas together. But predominantly, that business is in the Northwest and the northern part of England, where we don't have feed mills, and we don't have that many agricultural depots. But it's a competitor and it's always good to have competition.

And as a non-farmer, can you explain how critical fertilizer usage is?

Yes. So certainly, in higher input systems, fertilizer is key to producing food. So therefore in arable, it is key. But it's a crop nutrient. So the combination of what a crop needs is a combination between artificial fertilizer if you want to call it that, and also farmyard manure. So it is key to producing crops. It is very much key to producing food. But I think the key point going forward is that the point I mentioned earlier on about everybody, all farmers will know, we required and quite understandably so to operate with the nutrient-management plan that effectively means that the correct amount of fertilizer will be used in conjunction with any farmyard manure available on the farm to optimally grow that crop. So it is important for food production.

And do you have a sense of whether Brexit has had a positive or negative impact on the business longer term?

Positive or negative. Certainly, in the first few years, what we've been now -- 2, 3 years since we actually come out of Europe, I think there's obviously a big challenges, there's been challenges on import and export. But the business has performed particularly well over that period of time. The challenge of Brexit is very much on the people that we actually deal with. We import. So [indiscernible] business are first and foremostly. If we continue to have continuation of supply products and materials, most proteins that we put into our feed would be imported. So we haven't had an issue over supply. And of course, in addition to Brexit, there has been a challenge of the Ukraine crisis as well. The certain [indiscernible] as a result plus there's an extra cost of doing so. As far as our customers are concerned, there are certain sectors, the [ farming ] sector for example, for what we produce in the U.K. does get exported into Europe. So there are new challenges there, particularly in the first 12 months, I mean for the next, those positions are recovering, and those markets are recovering as well. So yes, it's certainly challenging, but the opportunity also is new markets. Some of these trade deals that have started -- have set up, Australia and New Zealand, and [indiscernible] would suggest that they may have an impact on farm and agricultural produce. But there are -- there's already a quota for New Zealand lamb that come in the country, so 114,000 tons into the U.K. last year, 85,000 tons of that was taken up and as a result of better markets nearer home, certainly in China and Asia. So I think, yes, there is challenges, but there's also opportunity. But for this business, we have not been particularly impacted so far.

And can you say where we are with the government's agricultural policy?