Wynnstay Group Plc (WYN) Earnings Call Transcript & Summary

Welcome to the Wynnstay Group Investor Webinar. Wynnstay provides a range of agricultural inputs and services to U.K. farmers, mainly in England and Wales, that includes animal feed and fertilizer. It also has a chain of 51 depots, which sell fencing and feed troughs, dairy hygiene products and so on. H1 results were reported last week. Alk has now been in the CEO role for 9 months, and Rob as CFO for about a year more than that. There's clear evidence of progress, and we've started to see the benefits of their strategic changes. So it's a very exciting time to be able to hear from management. Thank you all for joining today's call, and I'll now pass you over to Alk Brand. Alk, please go ahead.

Good afternoon, everybody. I'm delighted to report after 6 months of this financial year's result to get everyone on board. So we will get right into it. Our purpose is to be the supplier of choice for British farmers. And at the end of the last financial year, we have decided to change our segmentation to have 3 new ones, Feed and Grain, our edible and our stores. So we will be discussing our results through previous presentation in that format. So in terms of Feed and Grain, we manufacture and supply feeds mainly to [indiscernible] livestock farmers. We focus on feed the raw material trading and then on our grain marketing services. Our edible offering is mainly in Seed and Fertilizer. And then we supply the market with 51 stores. When we started this journey in terms of improvement, we have decided to focus on improvement in all 3 of these areas, and I'm delighted to say that today, we are going to start indicating improvements in all these areas.

So I'll provide an overview of our results for the year. We have a strong financial performance, and we've delivered improved profitability in each of our 3 segments. We've improved our margins in each part of the business, and that's through proactive pricing, cost management and structural changes that we've implemented. Project Genesis is currently on track. Our work streams are now mobilized and the teams are busy executing their funds. We've also changed our Exco structure and leadership team. We believe we've got a more compact and capable team leading the business forward. We've got disciplined investment programs in place. I will talk later around our new fertilizer blending plant in Avonmouth, some energy efficiency investments we've made at our Wynnstay Fry Feed mill and investment in capacity at our Carmarthen Feed mill. Our financial position remains strong. We've got good cash reserves. And from that and the improved financial performance, we're comfortable increasing our dividend by 1.8% and maintaining that progressive dividend policy. And finally and importantly, we're on track to deliver our full year forecasts, which will mark an improvement over last year's financial performance. So looking at finances in a little more detail. Our revenue reduced by 7%, half 1 '25 versus '24. For those of you who follow Wynnstay will understand that our revenue is driven by soft commodity prices, and those did reduce year-on-year, which brought our revenue down. but activity was lower, predominantly within our Feed and Grain segment. The wheat harvest was 21% lower in 2024 and so that followed that our Grain Trading business was 13% lower. So we have gained some market share, but our activity in revenue is lower. Very pleasingly, our gross profit improved by 7%, and that is a result of those pricing activities, which drove our margins up despite that fall in revenue and cost control and some structural changes, reduced overheads and meant that there was a 41% improvement in our adjusted PBT metric moving from GBP 3.8 million to GBP 5.4 million. As you can see, that's flowed through to improved EPS performance of 18.4p per share, which is up 29%. And as I mentioned, the balance sheet remains strong with net cash of GBP 10.3 million. Again, for those of you who do follow Wynnstay, you'll understand that we have a seasonal working capital cycle, which follows the agricultural calendar. That means when we forward buy materials, particularly ahead of the spring harvest and spring peak feeding season, it does require the highest level of working capital and the lowest level of net cash. That will unwind in the second half of the year, and we will -- we're forecasting significantly improved cash positions relative to the GBP 10.3 million by the time we get to the October close. As I mentioned, a declared dividend of 5.7p which is about 1.8% uplift from the previous half year. So looking in turn of the financial statements in a little more detail. The income statement shown here. What I want to do in this section is just pull out areas that maybe we won't touch on in other parts of the presentation, starting with that segmental allocation of the adjusted profit before tax. So as I mentioned, all 3 segments is showing improvement on H1 '24. Notably, with Feed and Grain and Arable, the half year performance is already ahead of the outturn from the previous October. Stores at 3.1%, showing that continued improvement in what was a relatively stronger performance from the store division in the previous years. Our contribution from joint ventures relates to our core investment in Bibby Agriculture, Bibby here a feed sale and marketing business based in Wales, the joint venture with Calne Agriculture Limited. Bibby have continued to have a really strong track record of performance over the last 3 years. And pleasingly, this year to date, they're showing improvement in our share as it improved as a consequence of that. If we look at net finance costs, they're marginally lower than H1 in '24. That's a function of lower interest rates, but we also have a lower level of borrowings. And if you note in the balance sheet in our results release, we have paid down some term loan that was maturing in the first half, and that was as planned and as expected. Moving on to the balance sheet. We have a strong balance sheet were underpinned by a strong asset base, and we continue to invest in that asset base during the period through fixed asset investments and also right of use assets, right-of-use assets relating predominantly to either leasehold property or our vehicle fleet. We have an annual plan where we refresh our vehicles. That's a border group plant, and we've continued to do that this year. We do have slightly higher working capital, and that's in line with the seasonality I mentioned but also a strategic investment in our Avonmouth facility. So that came online towards the end of April, and it meant that we'd invested in the stocks ahead of selling it and the sales will trickle through in H2. We expect that to partially unwind and we'll have a more normalized level of working capital in the second half. We also show the return on net assets for each of our divisions. So as you can see, we're showing -- we're using the terminology improved trajectory. So we've got an improvement in each part of the business. What we want to make clear though is that we feel there's further development potential, particularly within Feed and Grain but also in Arable Stores may be less so, but our ambition is for each of those segments within the next 18 to 24 months to be clearly above 10%. As I mentioned, net cash remains strong. We have a seasonal working capital requirement, and this is the lowest reported cash position. And just as a reminder, on top of our net cash position, we have committed cash facilities of GBP 10.5 million overdraft and up to GBP 15 million worth of credit -- revolving credit facilities or RCFs. Moving on to the cash flow. Again, we can see that seasonal movement in net cash, which will unwind in the second half of the year. We also show a graphical representation of that. And this is what I would call the normal H1 profile for Wynnstay, whereby we generate strong EBITDA, we have a working capital investment but we also show continued investment in CapEx, lease repayments and then we distribute our dividend, which is a follow-through from last year's full year. The key point really here are that unwind and forecast higher position at the end of the financial year relative to H1. What I'll now do is look at each particular segment in more detail. I'll give an overview of the financial performance, and then Alk will talk about the future development opportunities within each part of the business. So Feed and Grain, revenue reduced to GBP 160.5 million, as we mentioned, that's commodity, but also grain volume driven. Gross profit was reduced as a result of that. But on a unit on percentage basis, much improved and the adjusted PBT is more than doubled to GBP 0.9 million. A key point to highlight here was that when we reported our full year results, we announced that we were exiting from the least Twyford Mill facility. And we're pleased to report that, that was completed at the end of January on plan and on cost. But importantly, that's taken a significant amount of fixed cost out of our operating cost base for the Feed business. On an annualized basis, we expect that, that will save us of GBP 2 million on cost base. We've also retained the volume that we expected as part of that transition. We have a strong base now to grow our poultry position in the south of England. We've continued that strong focus on pricing, as I mentioned. We've also restructured our commercial team, and we've got a new sales leadership team in the Feed and Grain business who are driving that forward.

Thank you, Rob. So looking at this very important part of our business, we -- I've highlighted before but -- in the past, we ran our business very divisionally or if I might even use word silo, we now have an integrated focus. So all of the sales teams regionally are focused to drive volume growth. And this initiative has started from February and is part of the Project Genesis. And already, we are seeing some really, really good promising opportunities because of that original focus. So we've got to integrate the trading team, well placed to capitalize and on normalized grain market. So what I mean we've integrated. Again, as historically mentioned, we tried it from 3 different platforms before, namely GrainLink, Glasson as well as Wynnstay. These teams have been put together into one virtual community and the benefit of being working together in an integrated manner is showing some very promising upside opportunities and also the ability to manage risk, must make it. We've already made 2 major investments in terms of this year, signed up by our Board. And both these investments is to support efficiencies and growth. And before I mentioned the 2, everything we do and all decisions we make is with a view to improve our return on capital employed in our business. which we realize is not high enough. And we set ourselves some ambitious targets, but every decision we make in terms of investment need to underpin not only making the segment more profitable, but to help us to get that important ratio, to get the reported return on capital employed to a much, much healthier position. So the investments we made so far in this financial year is first of all, in our Carmarthen Plant, which is our feed milling operation in South Wales, to help us to identify certain bottlenecks and inefficiencies and that continuous flow of a business. And the upside of that is which we believe, by November this year, but this program will be completed it will help us to increase our capacity from this plant with 20,000 tonnes. And we have a strong ability to sell that capacity very quickly after it's available. And then for me, very, very happy to say that in Llansantffraid, we have a new facility for combined heat and power installation, which is going to help us to generate significant extra return on net assets. The energy now used is substantially cheaper than electricity prices we are actually buying currently and also will help us to get to the ability to make this part of our business much more profitable.

So moving on to our Arable segment. As a reminder, this is our Fertilizer Manufacturing, Fertilizer Merchanting and Seed Processing segment. So pleased to report that this was a volume on margin recovery, which drove much stronger PBT. Revenue up slightly at GBP 71.4 million with some clear improvements in gross profits at GBP 6.7 million and a GBP 1 million improvement at the adjusted PBT level. Fertilizer volumes were up 6%, seed sales up 5%, and there were more favorable spring planting conditions. However, most pleasingly, our gross margin was up 170 basis points. So again, strong pricing discipline in volatile markets. Our teams have got a proven track record of being able to navigate the fertilizer markets, particularly when they are rising, but it's that ability to capitalize on margin opportunities and drive performance. But also very pleasingly, our new fertilizer blending plant was completed in 8 Avonmouth Bristol. And that was completed on time and on budget. So that was approved in September, commissioned in March and live in April. So we're very pleased with that execution both in terms of speed, but also disciplined in how we've managed it on cost.

So the investment in Avonmouth, which Rob just spoke about, Avonmouth next to Bristol, will help us to have the ability to sell excess 65,000 tonnes of new capacity. And as Rob has indicated, very proud that, that facility was from planning stages to execution on time and within budget. And we now have upside to sell that capacity. And this Avonmouth facility is under the Glasson Fertilizer responsibility, Glasson Fertilizer, as you know, is our wholesale business, selling to wholesale customers but also have the ability to supply Wynnstay. And the market has been crying out for that capacity for a long time. We have it available now, and that will help us to grow our fertilizer business in the southern part of the country without any doubt. Then we strongly believe in our ability to expand our seed sales. We are particularly very, very strong in grass seed. And we have a very modern seed cleaning and blending plant in Shropshire in Ashley, which is only utilized partly. So there's still a lot of capacity available and the upside of putting more business prove this plant and selling it will not only have a sales margin opportunity but also help us to cover our fixed cost even more in that plant. And then strongly believe in our ability to broaden our Arable product range on a wholesale basis, both in seed and fertilizer.

Finally moving on to our stores. So stores have continued with a solid performance, generating good cash flows. Revenue increased to GBP 73 million. That was based on broadly flat footfall in transaction volumes, which were stable. The improvement was through pricing and pricing management, particularly looking to recover cost increases, which hit the store network, primarily through wage costs, minimum wage but also ahead of increases to National Insurance, which will come particularly in the second half of the year. So GBP 2 million worth of improved gross profit at GBP 19.1 million, and adjusted PBT was up marginally to GBP 3.1 million. We've continued to ensure we've got strong focus on advice, service and customer experience, and we believe that there's further opportunities to develop the performance of these stores.

So in the stores margin improvement through improved systems and buying leverage is a key area of our focus. And the talent and our team is strong and the ability and initiatives of our teams locally in all these rural locations will surely help us to get to this goal. Where ad there's definitely opportunity to relook at our product mix and serving our offerings in all these stores. There are marginal differences depending on location. We are really well suited to focus on new things and new initiatives, working with our suppliers but also through Wynnstay manufacturing offering to increase both market share, volume as well as our profitability. And then we have to continue to invest on multichannel routes to market. including the digital sales platform. We take note of trends, not only in the U.K. and Europe, but also in the U.S. We are closely working with people in other parts of the world as well to learn from their success stories. And although the U.K. is slightly slower in adapting to a digital platform, Wynnstay will be ready to benefit from opportunities when it comes. So I'm delighted to talk to all of you know about Project Genesis and the opportunities within Project Genesis. And I want to highlight again where this came from. So at the time of both Rob and myself, starting this journey together. We realized that the results of last year against our own very high standards, were disappointing. We also have a full responsibility, but we are working with investor funds. And therefore, we have to provide investors with adequate return on capital employed. And we see that as a major focus of project Genesis. Frankly speaking, everything we have to do needs to improve. But the experience of these type of turnaround projects have been -- but if it's not specific and detailed it becomes just a hope and not an action. And through a very strong collaboration all over the business, we identified several areas in our business where we believe we can improve. The benefit of Wynnstay is that we work from a fairly high scale in terms of volume but even marginal improvements multiplied over many thousands of thousands of tons and make a big difference. We started a bit in a back foot because I joined in the beginning of our financial year. And so our ability to influence the performance in our first quarter, which is a really important quarter in the winter for Wynnstay was not in play at all. And we only signed off Project Genesis in January, February. Teams were formed and trained and focused. And that's why we've always called this a design and initial implementation phase. We have upside, although there is already upside seen in our results, the real upsides will always come in the next 2 years when it's about core implementation and to accelerate our growth. So total basis of this is to improve everything we do to make a company more agile and successful, look at productivity and efficiency and make sure that we continue to integrate everything we do to address operational issues as we see it and then to continue to deliver growth. So Project Genus is really about the basis for expanding earnings and growth. So we have 9 work streams we're working to, and you will see that to the left, starting with revenue growth and margin improvement, et cetera. So we have set ourselves very specific targets of year 1, and we do the same for 2 and 3. So just to share some of the targets we set ourselves for year 1 was that we have to make sure that work streams are initiated and on track, which we've done. We said that we have to take a total operational asset review to look at every single asset in our business, location-wise, but also within the location with specific assets. Number one, to see but it will give us a return on net assets, which we require. Number two, that it is scalable and number three, that it's actually been maintained properly. So we've done and completed that review. We have a very strong opinion about which asset is worthwhile investing in and which ones potentially is not. We also know within a geographical area like for Carmarthen, where we have to invest because we have certain bottlenecks and lack of efficiency in certain parts of the continuous process. So we know now we have the best opportunities for investment can be. We have simplified our sales structure and aligned it to our regions with very specific focus on targets. Our feed raw material trading teams are now integrated under one platform. And from the beginning of November, we'll work on a common platform of decision-making as well. And our consolidation of our manufacturing facilities under one manufacturing leadership team has been completed and has been very successful. So everything which has to do with making a product is under one leadership regardless of in which segment it sits and the benefit of specialty and focus and the reduced cost base will be evident in the next 2 financial years. And Phase 1 of our manufacturing capacity of lift in Carmarthen has been improved, and we will actually create the extra 20,000 tonnes, which we are sure we can sell. And then, a small part of our business, young animal feed, we've realized that this company cannot be a stand-alone business, and we've successfully integrated, but at the beginning of -- sorry, at the end of our last 6 months. So the benefit of that will be seen in this next 6 months.

Okay. So we just want to move and touch on our strategic proposition before I conclude with the outlook. So we've talked a lot around Wynnstay, as a business, a long-standing business, 107 years old this year, and that had existing strengths. We've also focused a lot around Project Genesis, which is our turnaround plan to improve performance and get the returns where we want them to be. And as Alk has mentioned, we've got growth ambitions we want to use scale to drive forward what is fundamentally a commodity-based business that can benefit from that scale and multiplication effect in terms of volumes and throughputs. So looking at those in turn, we're a national brand, we're trusted for quality and service. We offer a breadth of activities across agricultural sectors. So we're not just exposed to feed or fertilizer or operating solely from a store network. We've got a strong balance sheet. We've got the cash and lending facilities that we need to develop each part of the business, and we also have the potential to drive growth through M&A, if that's appropriate. We're retaining a progressive dividend policy. We feel that we can address bottlenecks invest for both efficiency, growth and provide continued income returns to shareholders and we have an opportunity to scale. While GB Agriculture is a flat, stable market, there's lots of consolidation opportunities, either at a farm or farm supplier level, we feel that as an established player, that's an excellent opportunity for Wynnstay. Through Project Genesis, we want to really build on that and drive to be an efficient and commercially driven business. We want a more resilient operating market. So markets, weather patterns will always impact a business like Wynnstay, but we wanted to impact us from a higher base, so that our earnings are less volatile and less prone to factors outside of our control. We want to streamline the business. And hopefully, some of the examples that Alk has provided there show how we've got on and started to deliver on integration, which is going to build synergies, efficiencies and ultimately save costs. We're a growth-focused group, and we want to provide continued returns and improved returns for investors, and we were very focused on improving our return on capital and return on net assets. And we believe that from this significant upside for the share price in Wynnstay. And through the growth ambitions, we want to have a higher market share. Improved performance clearly will improve our EPS return on capital from a strong balance sheet and from that return on invested capital for shareholders per share can be improved, and we're very confident in what's possible through both Project Genesis and the broader strategic proposition. So moving into the summary. We've made a strong financial recovery across all 3 segments in the first half. We're pleased to say that Project Genesis is now live on track and is starting to deliver. We've got much more focus and discipline in how we're allocating capital. We're making sure that, that's predominantly focused on ensuring strong return on capital across the business across all 3 segments, whether it's for growth or unlocking efficiencies. As I mentioned, our financial position remains strong. We've increased our dividend by 1.8%, and we remain committed to the progressive dividend policy. And we believe the outlook is positive, both in terms of market conditions, farm gate prices, whether it's dairy, red meat, or free range eggs. All of those are in a position such that we feel that we're positioned to deliver our full year outturn and we've maintained our market forecast for the full year. That concludes the presentation. I'll just hand over to Alk for some closing remarks, and then we'll open it for questions.

Thank you, Rob, and thank you for listening to us on [indiscernible] . For us, it's important to highlight that this is a -- this is a plan which we believe in, which we believe we can execute and which address both the improvement on our cost base, to make sure we operate this business at the lowest possible cost, improving our margins, removing inefficiencies and lack of productivity in our business, but also, it's a growth story. We believe that the assets which we have is credit assets, which is scalable. We believe that because of a fragmented market we operate in, we can expand our market share and our profitability in all 3 of these segments. We believe that for now, these 3 segments are independent on each other, work well together because all of them have the same purpose, which is to serve the wallet of our farmer to help our farmer to farm better through advisory knowledge and advice, but also to become relevant in every 3 of these areas, because there is no reason why we cannot be strong in all 3. We have a very strong customer base, which we indicated in the beginning. We have a strong marketing approach through our CRM system, to capture more business with current business. But we also believe in our ability to continuously to grow around our current market share and around our current asset base. We believe that although opportunities will come our way to acquire other businesses. Our focus should be at the moment to increase everything we do well. And -- but tactically and wisely the best investment is to look after our current asset base first. And we're confident that over the next 6 months, that focus will give us the returns and the confidence then to actually look at other opportunities when it may come. So right now, we stand by the expectations, which we all agreed in the market. We are conservative in our approach because we realized that in the past, we have disappointed the market by not always getting where the market expected us that we should be. And for now, we have determined to be cautiously moving forward to improve the business every day. every month, every quarter and every year under our leadership. So thank you for listening. I hand back to Gareth and we can take some questions.

[Operator Instructions] First of all, we've got a couple of questions clustered around capacity. First one is, what is the current capacity at Carmarthen before the extra 20,000 tonnes? And what effect does seasonal demand fluctuation have on the utilization of this capacity?

Yes. So -- before I give an answer that, I have to say that in every area, including the Carmarthen area we operate in, although we have a strong position, it's still a relatively small market share. So therefore, it means that we have many competitors, which clearly are doing a good job. And that they will -- we will have to go and fight for that extra business. So our capacity in Carmarthen is 140,000 tonnes, 140,000 tonnes. And during the busy times, we're running at flood capacity full. So to create this extra capacity, which we now spoke about, the 20,000 tonnes, we did not add extra production lines or additional lines. This focus is clearly on efficiency improvement because of downtime in the low because of breakdowns and certain parts of equipment failing us has been significant. And just by improving and replacing that we believe that we will get an upside 20,000 tonnes. So that's on top of 140,000. And we call it Phase 1, which indicates that we can be a Phase 2 and 3. And if we look at that additional capacity on top of the 20,000 tonnes. It will only come on the 2 conditions: One, our commercial plan mix is supported. So we need to be sure that we were able to sell that extra capacity. And secondly, back to the market, we will always be focused on to get the return on capital employed, which is much improved by where we are today, with ultimate wish list, not a promise, wish list to get to close to 15%, but that needs to be aligned to that. So if we do create extra capacity, we will factor in how much we can extra sell and what the returns on that will be. So I'm confident that the investment we made will definitely tick that box.

Okay. That's great. As a related question, which you've sort of touched on, but I'll ask the question anyway. So the question talks about please, can you provide more information on the expansions at Carmarthen and Llansantffraid, specifically, the capital outlay at each and the expected payback periods at each.

Sure. I'm going to ask rob to join me in this conversation. But I have to be clear that there's a difference between a wishlist and something on the investigation or under consideration and something which has been signed off. So the only signed off, Board approved project in terms of capacity has been the 20,000 tonnes in Carmarthen. And I've actually already answered the question, what that will do to our returns. The rest are under consideration and need to go through that filter of will it actually give us a commercial benefit. And will it give us a return to get to our ambitions. Before I go to Rob to verify some of our numbers, I also have to say that not everything we will invest. Again, it needs to be still approved by the Board, will be done on the merits of a payback because we do have some responsibility of catching up with certain health and safety investments. 3 groups of stakeholders are really high investors. Our customers, but also our colleagues, and we have to make sure and we have a legal and ethical responsibility to make sure that we work on the conditions, which is safe and modern that some of the investments over time, will be made to make sure that, that is the case. And secondly, we have a responsibility to look after our assets well, because decisions we make today -- and if we make the right decisions today, we'll benefit the company over decades and not only short term. So we will not neglect the responsibility of investing in proper maintenance in all our assets. Rob, do you want to expand to that?

Yes, I'll just provide a little bit more color. So we -- as Alk's mentioned, we're committed to a capacity improvement by Carmarthen. So that's a GBP 0.5 million investment, that will generate 20,000 tonnes of capacity. And based on our expectations, that will deliver us around 15% return on net assets. At Llansantffraid, while we haven't -- as I mentioned, we haven't formally signed up on any expansion plans. What we do have is the efficiency investment in terms of the combined heat power generator. That's a GBP 1.5 million investment that will generate around GBP 0.5 million annualized savings, quite a compelling payback period in terms of that one. And as we mentioned from the outset, the Avonmouth facility, the investment there was around GBP 700,000. Again, once we get into -- there's a phased ramp-up time in terms of year 2 and year 3. But after 3 years, we expect to be at that 65,000 tonnes of field capacity. And at that level, we will be generating the 15% return on investment.

That's great. We've had a couple of questions emailed in, one around Project Genesis, how has Project Genesis being received internally?

So it's been -- I'm used to turnaround projects. And I have to say this one has been received the best internally than anything I've been involved. And there's a huge drive from our teams all over the business to be part of the success story. And the important thing is right in the beginning, we spent a lot of time on talking about why do we need to change? Why do we need to do things better, and I'm incredibly encouraged and motivated by the support of all our teams for the business. I will not say that every single person in the business was excited about it in the beginning. But these type of things tend to sort itself out over a small period. And right now, our teams are absolutely focused and we've done really -- I'm talking internally now we need to focus much more on the detail. It's now about the execution and the discipline to make sure that what we promise we deliver.

Okay. Next question. Is the poultry business now on a firm footing? And can you just elaborate, please, on how you're meeting your supply requirements?

So I'm also going to ask Rob to join me on this one. But the answer is yes. So when we exited Twyford, our single goal was to make sure we protect all our customers. And we have done the movement away because we had to find a place for that in terms of manufacturing. We've done it twofold. One is to move production in the North where we can deliver from Llansantffraid to our Llansantffraid mill. And from where, we deliver to a big percentage of our customers. And the rest we've outsourced. And very stable with a very good relationship with our third-party manufacturer, but that's a holding position in terms of what we want to do with poultry. So it was the best option of all the options on the table at this stage when we had to make the decision. Now we're actually looking at how do we grow our poultry market share. And that is been in discussion at the moment. We are delivering a new 5-year strategy to our board in August this year over the next 5 years and our growth plan in terms of poultry supply and manufacturing is going to be part of that discussion. But yes, at the moment, we kept all our customers, and I believe that they are happy. Now we need to see how we can grow that.

All I would add is that this was around stabilization. We have some quite interesting opportunities on the table in terms of how we can manufacture poultry feed. We're not at a stage to make any firm commitments in terms of investment there. As you understand, we've got to assess what's the most profitable way of growing that business. But there's certainly options an interesting initiatives that are on the table there.

Okay. Thank you both. We've got a number of questions on the sort of return on asset, return on capital theme. So if I -- if I start first with a definitional one, how are you defining return on net assets for your 15% return target? For example, is it profit before tax divided by net assets? Are you applying the same target to all 3 segments of the business? And then when you state 15% return on asset -- return on net assets, sorry, at capacity, what are the implications of seasonal demand fluctuation on this return?

Yes. So there's a bit to unpack there, but I'll just break that down. In terms of -- yes, quite right, our return on net assets definition is our PBT, albeit adjusted PBT. So that takes out any nonrecurring items and noncash items. It's the adjusted PBT level is actually consistent with our definition for bank covenant reporting as well. So PBT is divided by net assets on the balance sheet. And when we do that for our segments, we allocate assets across the balance sheet, where we -- to the segment that they relate to. So for certain core anchor sites specific to a segment that's easy, where we have corporate assets or shared assets, we make in allocation. But we've spent a lot of time on that over the last 6 months, and we're happy that we have a fair, reasonable and sensible allocation. And just in terms of -- to give some further context, we do drill down to look at return on invested capital. So taking a net profit after tax as a proportion of invested capital. So just there's some guidance, 15% return on net assets is circa it's 12.5% return on the invested capital after tax. So just so everybody understands that we're very thorough in terms of how we assess that. We are also looking at how we can develop those returns across each segment. And the ambitions are for each segment to have clearly higher than 10%. We think that that's achievable within a sensible time frame through the initiatives of Project Genesis capacity through development. And then finally, going back to the seasonal. When we talk about at capacity, we've got an annualized return. So we're factoring in the demand profile throughout the year, what that will return in terms of profit and what that relates to as a return on the capital or assets we've invested in any particular project or segment.

Okay. That's great. And then following on from that, it's a different question about it's sort of a related theme. The question was asking about the return on assets goal being above 10% within 18 months. If that's the goal, it seems very ambitious. I guess just some comments around timing or progress through Genesis or whatever else you see getting you towards those numbers.

Yes. I mean I think it's just in terms of -- we -- and this kind of comes back to what Alk's mentioned around, we've got our forecast in the marketplace, and then we've got the ambition that we think is achievable. And we just have to be careful, I guess, as a public company and equates between the two. Well, when we looked at Project Genesis, the thesis was, we've either our balance sheet, which is too heavy or earnings results, which aren't high enough. And we firmly believe it's the latter. And we also think through fairly straightforward common center initiative programs, integrations. I think as we've evidenced through some of the efficiency benefits through the investments we've made we can really start to change the profit profile of the segment. And we do believe that within that kind of time window, there is both the opportunity, the ambition and through the strong balance sheet, the ability to unlock that benefit and to deliver it, albeit we just -- at the moment, we're focused on, we've delivered and improved first half. We've got a full year outturn that we are confident of delivering, but we've got to get that delivered first with the -- we're then working on our 5-year strategy detailed plan, bridging Genesis turnaround into the longer-term strategy for the business. But in short, yes, we're confident, and we believe that we've got credible plans that can achieve that level of return. We're just in the process now of executing.

Okay. Understood. Another question, would you be prepared to make an acquisition now if it met your hurdle rate or do you need more time to stabilize the business?

So the whole question acquisition is a complex long discussion, which we probably don't need to -- we probably don't have a time now, but it all starts with what do we do about cash. And obviously, you can gear yourself up as well. I believe that we have a huge responsibility to make sure we run this business as successfully and profitable and efficiently as possible. So therefore, we will not go and look for something today. But sometimes opportunities does come your way. And when we, as a senior leadership team, will be not responsible not to look at it. But right now, we're not running around looking at opportunities. If something comes out of our way, we will look at it. But then it actually goes into Rob's filter of how do we allocate our capital. And it needs to enhance our shareholder value. If not then we will not look at it. And we will probably say no to most of the opportunities coming our way. And -- but you can never say never. And my personal wish is if we do something, it's transformational and really makes a difference because the last thing we want to do is get distracted. We -- our single-mindedly focused on execution of our business plan, which is Project Genesis and our strategy. Phase 2, one is looking at acquisitions, one is tactical something comes to your way, you say yes or no to it. One is strategic. Today is not the day to look at the strategic things, but we also will always be willing to talk to somebody if they want to talk to us.

That's great. Another e-mail question. Can you roll out the Depot Merchanting business across the country? Or will you broadly focus on the geographical areas that you're in at the moment?

No. We obviously will not expand in our current areas because I think we are well covered there. So if we would like to increase our footprint, it will have to be geographically. There's also the matter of the competition rules of the country. So more than likely, if we do want to expand it, we'll be outside of current territory.

Okay. Understood. We've got one more question in the queue, which I'll ask in a minute. [Operator Instructions] The last question we have at the moment is this. With GBP 5.4 million in adjusted profit before tax -- excuse me, sorry, GBP 5.4 million in adjusted profit before tax in H1, do I read it correctly that your target of GBP 8.5 million PBT for FY '25 is easily in reach? In fact, it looks like you're well on track to meet the objective you set for year 2, i.e., FY '26, which was GBP 10 million adjusted PBT. How should we think about this?

I think that Rob and myself probably will tackle this from a different angle. I think the way I would like to look at it is we have to fight for everything. It's not an easy market be. And I'd rather like to be known as somebody which is conservative and careful before we promise something. The business have not delivered on the promises for the last 2 or 3 financial years. So but we're easily, unfortunately, doesn't sit in agriculture. Everything is difficult, but we will do our best to reach that number. And if we exceed it, it will give us more confidence in the future to probably -- let me a bit more open about in our own mind, but how far would like to stretch our promises. But now we'd like to keep it probably safe and decide that nothing is easy, and we will continue to work hard to exceed expectations. Rob. I don't know what you want to add.

I mean all I add is that is that we do have a seasonal cycle within agriculture within Wynnstay's financial year. And so in terms of the phasing H1 to H2, we would expect a stronger H1. And I'll just kind of come back to the fact that we've maintained market forecasts that gives confidence around the 8.5%, but clearly any upside once we are aware and confident around that, we'll update the market accordingly.

Okay. That's great. And then the final question we have is around the weighted average number of shares in issue, which is increased by -- according to this question around 4% per year over the last 15 years. So it'd be interested to understand your policy on further share issuance and I guess, whether people can expect to see PBT flowing down to EPS in terms of earnings.

Yes, is the simple answer to that. So we have -- as part of our capital allocation, we maintain the progressive dividend, but we're also focused on, as I call it, keeping our T tight. So for those who noticed in the RNS at the year-end, we have now paused our script dividend policy. So any dividends are now pay fully in cash. We've also previously issued shares to satisfy long-term incentives. Again, a Board policy now is that we've got an EBT trust that we're used to buy any shares off market to satisfy. So yes, for the foreseeable future, we're focused on maintaining 23.1 million shares in issue and any benefits in PBT flowing to improved EPS.

That's all very clear. Thank you very much. I'm afraid we've got no time for further questions at this point. So in a moment, I'll hand back to Alk for any final closing remarks. I would just like to remind everybody that there is a feedback form which we'll open after the conclusion of the webinar. Your feedback is very useful to management team. It's a great way for them, to thank them for taking the time to present to you today. So please do take a couple of moments to fill that out. If you don't have time right now, the link will also be sent to you in the follow-up e-mail. So now I'll hand back to Alk for any closing remarks. Alk, please go ahead.

Thank you. I really enjoyed talking to all of you. We are very focused on executing our plan. The success will be in the detail of our execution. We are really very grateful for the support of our investors in our difficult times, and we hope that this team will continue to prove, but even us being conservative and careful before we predict anything is a team which is really focused on delivery of -- and the execution of our business plan. And we strongly believe in the plan, and I'm grateful for the support of our investors and the confidence of our investors, and I'm looking forward to talk to you all again in 6 months from now.

That's great. Thank you both very much, indeed. Thank you all for attending. This is the end of the webinar.