Thank you for standing by, welcome to the PGG Wrightson Limited half year results. All participants are in a listen-only mode. There'll be a presentation followed by a question and answer section. If you wish to ask a question, you need to press the star key followed by one on your telephone keypad. I'd now like to hand the conference over to Mr. Stephen Guerin, Chief Executive Officer. Please go ahead. Thank you, operator. Ata mārie. Welcome to the PGG Wrightson results briefing for six months to 31 December, 2022. My name is Stephen Guerin, the Chief Executive Officer, and I'm pleased to provide you an overview of our interim results for the 2023 financial year. Joining me on the call today are Peter Scott, our CFO, and Julian Daly, our General Manager of Corporate Affairs, who is also our Company Secretary. Before discussing our operating results for the half year, I want to comment briefly on Cyclone Gabrielle and the scale of the impact of these weather events that is emerging. Our thoughts and wishes go out to our PGW team, clients and communities who have suffered loss during the devastating cyclonic conditions that have battered much of the North Island. The safety and wellbeing of all who have been affected by these extraordinary conditions has been our priority. Beyond that, we will look at ways in which PGW can support our team, clients and rural communities as they assess the impacts and move into the recovery phase that follows. Despite the initial shock at the scale of the devastation, we know that the fabric of our rural communities is strong and resilient, and we'll stand with you as these challenges are faced as we have done in the past. Turning to our financial results, our trading performance, key themes and initiatives for the period. I will discuss some of the thoughts on the year ahead, then there will be time for questions and answers. During my presentation, I refer to predominantly our operating EBITDA, which is a non-GAAP measure that allows us to best describe the business operations. I'll refer also to our ultimate bottom line of net profit after tax, the formal GAAP measure. The key results of note are our operating EBITDA of NZD 47.8 million, up NZD 0.4 million or 0.9%. Revenue of NZD 585.8 million, up NZD 33.4 million or 6%. Net profit after tax or NPAT of NZD 21.2 million, down NZD 1.3 million or 6.4%. Total shareholder returns of +3.4% for the period. A fully imputed dividend of NZD 0.12 per share has been declared by the board. A record operating EBITDA for the first half year result and the strong performances from our retail businesses. Operating EBITDA guidance has been reduced for the full year to around NZD 57 million. The half year result included new revenue and earnings highs for our Retail & Water group, which generates the majority of its earnings in the first half of the financial year. This was partially offset by challenges in our agency business, in particular our real estate business. The overall trading performance reflects the healthy state of the group and demonstrates the value that our customers see in the technical expertise of our people and PGW's full service offering. It is pleasing to see results that reinforce we're strategically on the right track as a business and are perceived as leaders in the field in the sector. I'll just now start by covering trading performances for our business units, beginning with the Retail & Water businesses. The Retail & Water business incorporates Rural Supplies, Fruitfed Supplies, water and AgriTrade brands. The first six months of the year have seen continued growth building upon the momentum we have been gathering for some time. Operating EBITDA for Retail & Water was NZD 48.9 million, up NZD 5.2 million, and revenue was NZD 500 million, up NZD 31 million. Excuse me. We continue to see an increase in market share with new clients moving their business to us. We regularly hear that's attributed to the superior technical ability of our people and the high level of customer service we offer. We maintain a stable sales force, which is well supported by our specialist technical and R&D teams. Our professional development program is designed to raise the sales and service performance of our frontline staff, including all store managers, customer services representatives and field representatives. The logistical issues of getting product in at the right time for the season persists. We continue to work with our suppliers to bring good product through there where we can to avoid delivery delays. After a record year last year, our Rural Supplies business has continued to trade well. Revenue is up on the prior comparative period. Some of this is related to price increases in fertilizer and agricultural chemicals. We continue to see our market share grow. It's been a frustrating season for many, with wet conditions and little respite over the three-month critical spring growing window. Given the tough season through December for most of the country, with continued rain, cooler temperatures and localized flooding, the team have done exceptionally well despite COVID-19 absentees, staff shortages and supply chain issues. Our Rural Supplies b rand campaign aims to communicate our store teams and technical field representatives' passion for helping our clients and local communities under the tagline, "Working alongside you every season of the year." The campaign portrays the way stores and those in the field work closely with our clients. We are an integral part of our local communities we live and operate in. Our people go the extra mile to help our farmers meet their aspirations, combined with their technical knowledge, delivery on value on farm. Our Fruitfed Supplies business has also had a strong first six months on the financial year and continues to grow and set new benchmarks. This has not been without its challenges, as the season is influenced by climatic conditions. It was extremely wet in the North Island, which hampered spring crop and ability of our clients to work their properties. An unseasonably heavy frost in October caused significant damage to the wider Bay of Plenty and Waikato regions, and impacted kiwifruit and blueberry crops. Wet weather in December also impacted vegetable crops, making harvesting difficult. Growth in the horticultural sector continues. We are seeing new investments over the last few years now coming into production. Our large corporate client base continues to grow. These clients often seek out a full year's program of crop protection and nutritional requirements with the establishment of long-term supplier agreements with PGW. Returns in some sectors have been challenging in the second half of the 2022 calendar year. Both apple and kiwifruit industries have experienced reduced returns through price drops and fruit quality issues. Fruitfed Supplies won the Indevin Villa Maria Legend Supplier Award at their annual prize giving. It was encouraging to receive this recognition from a prominent industry participant who values our people and their excellent service through a difficult season. Our Water and Irrigation business continued to consolidate market share through new clients and repeat custom. The team are focused on enhancing the customer experience through all fronts in parts of our business. This has helped in capturing in-field service opportunities through identifying system upgrades and offering these advanced benefits to our clients, such as panel upgrades, enabling client mobility, and overview of remote farming irrigation systems. Supply chain issues continued throughout the period, with most irrigation equipment sourced from offshore. Wet weather during the period hindered some scheduled maintenance work. AgriTrade, our wholesale business division, celebrated its 10th year anniversary on September 22. Given AgriTrade's size and strong growth, this milestone presented the opportunity to review the structure of the business with a reset and refocus to enable future profitable growth. AgriTrade increased its revenue compared to the prior period, as sales for some lines of product occurred later in the season due to the delayed cool start to the growing season. I now want to turn and talk about the trading performances of our agency businesses. Our agency business includes livestock, wool, and real estate. Agency delivered an operating EBITDA of NZD 3.6 million for the first six months of the 2023 financial year, a reduction of NZD 3.8 million compared from the same period last year. Revenue was NZD 84.7 million, up NZD 2.4 million compared to the prior period, influenced by the mix of sales versus commission revenue. The first six months of trading has been impacted adversely by weather, coupled with overseas market uncertainty resulting in reduced meat schedules. The meat schedule suffered, with a drop in sheep and lamb felt most keenly. There was a reduction in processing capacity caused by processing delays in the meat companies. Overall, there was a drop in volumes of stock traded. Both volumes enjoyed a good spring growing season, with animals held on-farm longer, creating stronger demand for prices of, and prices for cattle. Beef prices held up well and volumes were on plan. Exceptional grass growth throughout most regions of the country saw large amounts of stock winter feed being made. Our livestock supply chain initiatives and strategy progressed over the first six months of the financial year, with some new initiatives added to our existing strong valued partnerships. During the period, GO-STOCK celebrated two significant milestones, with 2 million lambs purchased on GO-LAMB contracts and 300,000 cattle procured through the GO-STOCK beef launch, since launch. Farmer awareness and use of the GO-STOCK has continued to grow and assisting sheep and beef and dairy and deer clients with their cash flow management needs. GO-STOCK enables them to free up capital to invest in other areas of the business. Bidr, which is our launched at saleyard product in 2021, are now live streaming auctions from eight saleyards throughout the North Island. We have seen further uptake in our hybrid genetics, saleyard, and on-farm machinery sales. Continued growth in the dairy markets saw bidr utilized for a number of in-milk sales in September, October, with strong sales bookings in the second half of the 2023 financial year. These have contributed to account, an increase in account sign-ups and website traffic. PGW deer velvet sales made earlier in the season, strong pricing on the back of contracted demand with overseas buyers, particularly contracts for Super A velvet, destined for South Korea's growing health food market sector. Growers benefiting from these contracts countered the weakness of the Chinese deer velvet market beset by pan-pandemic disruptions. Demand for these elevated prices have driven up supply volumes to PGW velvet. Consequently, confidence among farmers helped raise the stakes at stag sales held in January 2023. PGW's young talent livestock auctioneers achieved a trifecta by winning first, second, and third in the live animal auctioneers competition at the Canterbury Park in November 2022. Fallout from the COVID-19 pandemic continues to challenge the strong wool industry, especially values and associated worldwide demand. Growers encountered increasing costs on the back of fallen crossbred wool prices. The Merino season has been supported by good value contracts with brand partners and robust fine wool option prices. Growth in our wool contract business supports our grower client base, with contracts delivering premiums over market prices. PGW has achieved share growth in the New Zealand Merino wool market. International travel has returned, with several of our large overseas customers visiting New Zealand. It has been beneficial to renew contact and highlight the quality of wool our growers produce through visits to our farmer clients. PGW's wool export business, Bloch & Behrens, has done a good job of negotiating with overseas customers and local growers to ensure contracted obligations have been fulfilled. The Bloch & Behrens team have again been able to visit customers overseas, with more trips planned for later this financial year. By working with directly with retail brands, both nationally and internationally, the team continues to build key relationships to support our grower clients. The volume of bales procured and sold on were on par with the same period last year. The farm property sales continued with the sheep and beef sector, with a large number of high-value sales in excess of NZD 20 million. Dairy sales improved during the first six months of the financial year. However, there was not as many higher value sales traditionally supported by through corporate activity. Residential and lifestyle sales experienced a significant slowdown throughout all markets. The real estate market was impacted by a general negative sentiment owed to rising interest rates and decline in property demand and sales, mismatch of vendor purchase expectations, shrinking buyer pool, and a raft of regulatory challenges coming to the rural sector. As a result, earnings from our real estate business were significantly back from the buoyant market seen in recent years. This explains the majority of the reduction of earnings for the agency operating segment. We launched and refreshed the PGW Real Estate website, which has a modern design that allows an easy accessibility and navigation around listings, articles, and more on the site. In addition, it gives us more flexibility to grow and develop features and functionality in the future, ensuring that we remain competitive and meet the changing needs of our target market. PGW Real Estate increased its footprint in the Wairarapa and Central Hawke's Bay through several real estate business acquisitions. Turning to cash flow and debt. Cash flow from operating activities saw a NZD 35 million outflow. This compared to a NZD 70 million operating cash flow outflow for the prior comparative period. Working capital balances built during the spring were consistent with the seasonal build in prior years. Compared to the prior comparative period, these were higher as a result of supply chain challenges and price increases. We grew our GO-STOCK grazing receivable by NZD 7.2 million versus the prior comparative period. We increased our banking facility limits by NZD 30 million to provide prudent headroom and also fund potential growth opportunities. Capital expenditure was NZD 6.2 million, an increase of NZD 4.6 million versus 31 December 2021, which includes investment in our business improvement program, which we'll discuss further below. The group made higher income tax payments as a result of strong FY 2022 financial performance. As a result, net interest bearing debt was up NZD 48.6 million compared to 31 December 2021 at NZD 95.5 million. In response to the positive earnings performance delivered during the first six months of the financial year, the board declared a fully imputed interim dividend of NZD 0.12 per share, which will be paid on 4 April 2023 to shareholders on PGW share register at 5:00 P.M. on the 27th of March 2023. Our total shareholder return for six months to 31 December 2022 was +3.4%. Our full year strategic total shareholder return target is +10% per annum. Total shareholder return is calculated based on the movement in share price during the six months to 31 December 2022, plus dividend $0.01 per share paid, divided by the opening share price. As a business, we seek to continuously improve the safety and wellbeing of our people. We are currently embedding a revitalized strategy to support safety improvements. With the guidance of our people, we have started redeveloping our critical risk program, establishing regular toolbox talks to share key topics and learnings. We're energizing our contractor management and producing an executive leadership safety award to acknowledge those going above and beyond to improve health and safety and wellbeing at PGW. Our wellbeing action group undertook a survey of our people to better understand what wellbeing means to them and what they want from a wellbeing program. With a revised learning and development strategy and resourcing, we continue to invest in our people through multiple skills and leadership-based programs to foster the strength of our internal pipeline of talent. During the period, we refreshed our Max Rewards loyalty program, as well as a brand-new look, our plans, an enhanced shopping experience, membership tiers, and access to wider member benefits as part of the program. Max Rewards members have shared their appreciation for having the ability to earn points and receive benefits as they spend with PGW. They've been pleasantly surprised by the extent of our catalog range. As a result of the Max Rewards program, customers are expected to increase their spend in transactions across a wide array of business units and improve the customer lifetime value. In the first half of the financial year being the busiest time of the year, for our retail teams, the program has launched with a slow and steady approach and forming further membership drive planned later this year. Following the materiality assessment undertaken last year, we have been engaging across the business to redefine our sustainability strategy. These workshops have continued to contribute to the creation of a sustainability strategy reporting framework across three pillars of environment, social, and governance, or ESG. ESG working group reviewed the United Nations Sustainable Development Goals or SDGs to determine which SDGs have the most relevance to our corporate strategy, sustainability strategy, and materiality assessment. This work is continuing, and we determine the actions, targets and metrics to measure our progress on achieving the SDG is most relevant to our operations. We continued with the implementation of significant investment, both Operating expenditure and Capital expenditure components, to our company-wide business improvement program to simplify PGW's IT systems. Internally, we know this as Project Softest. This program will simplify our technical IT environment and standardize business processes. We expect the program to go live in FY 2024. As we think about the outlook for the f inancial year to June 30, 2023, we do so with the benefit of a stronger trading performance over the first half, with PGW well-positioned to capitalize upon the opportunities ahead. While noting the extraordinary good 2022 financial year, we hold a degree of caution looking forward with the remainder of the financial year, given the volatility in the macro operating environment. New Zealand farmers and growers are currently facing a range of uncertainties and hindrance. Two recent rural confidence surveys conducted prior to Cyclone Gabrielle have reported farmer confidence levels as some of their lowest sentiment levels since surveys began. Our clients are experiencing an environment of rising interest rates, tightening credit, increased input costs, labor shortages, and supply chain disruption. An uncertain geopolitical and domestic regulatory landscape and adverse weather events, including the extraordinary impacts of Cyclone Gabrielle that affect the agricultural and horticulture sectors hard over large parts of the country. The full effects of these dynamics are yet to be assessed. Despite these uncertainties and reasons for caution, we also see plenty of positive fundamentals in the medium to longer term outlook for agriculture and horticulture. PGW is also very well-placed to support the sector through its challenges and opportunities that will come. COVID-19 restrictions have been lifted, and borders have reopened. Supply chain disruptions should ease, as anticipated that inflation will come off its peak through the course of this year. The plan for New Zealand's primary exports will remain through all these challenges. PGW's... Sorry. The primary sector has performed well. PGW's board is pleased with how PGW has traded. The strength and diversity of the PGW's portfolio on its businesses and the way in which the business has executed on its strategy. On balance, PGW's board's outlook remains cautious. We see some softening based upon the macro factors outlined and accordingly recalibrating our forecast operating EBITDA guidance for the financial year to 30 June 2023 to around NZD 57 million. These results would not have been achieved without the dedicated team of passionate people who have supported each other throughout the year in the challenging conditions in which we've operated. On behalf of the board and the executive team, we thank our team for living our values and providing exceptional service to our clients and for making a positive contribution to the rural communities in which we live and operate. We thank our team for existing new clients who have put their trust in us. We strive to go the extra mile to ensure the success of our clients' businesses. We appreciate the support of our suppliers who have worked with us to ensure our clients receive their orders on a timely manner. We acknowledge our shareholders, and we are committed to achieving our strategic priorities to deliver value on your investments. Our 2023 half year report is available on the NZ Stock Exchange website under the PGW ticker, and also on our PGW website. That brings to conclusion the formality of our presentation, and I open the call for questions. Thank you, Operator. Back in your hands. Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Christian Bell from Jarden. Please go ahead. Good morning, team. Well, just a few questions from me. My first one is related to the new guidance. So just your initial guidance was around NZD 62 million, with some cautious optimism. Obviously, it's come down to NZD 57 million. Can you just sort of provide some color as to what has actually driven the downgrade? Are you able to sort of explain the split from the original guidance between Retail & Water and agency and what the new split is? Just to give an idea of where the weakness is predominantly coming from. Yeah, Christian, it's Peter here. The majority of the weakness, you're right, is in agency, and really it's specifically in real estate. You know, pretty well publicized to the market in the real estate, especially in residential and lifestyle blocks. The other one is actually in livestock. Sheep meat prices, as Stephen mentioned, have been falling over the last few months. The livestock performance over December and January, you know, was impacted by those falls in commodity prices for sheep. I'd say that the Retail & Water business is pretty much similar to what it was, reasonably similar to what it was, but the agency businesses we're expecting to be back by 30 June. I mean, given the, Retail & Water is kind of the primary growth driver anyway, I mean, it's probably quite a, quite a good outcome given the, given the circumstances. Would you kind of agree with it? Yeah. Yeah. Yeah. I'd agree with that, Christian. Just to give you some context, Christian, sheep prices are back about 80% year- on- year. Just to repeat that, sheep price is back about 80% year- on- year. That's the market price. We're operating in an agency model, so we just reflect the movement, reflects, you know, in our earn as well. Cattle and cattle prices remain pretty steady. There's been those constraints in the volume, that's been passing through the Right. Yep. Christian, I was just gonna say remember too that Retail & Water or specifically Retail & Fruitfed Supplies is a lot of it's a first half of the year financial story. The second half is quite dependent on agency results and, you know, things like our forward sales are similar to previous years for like dairy goods and that, but they are not, they're not at the sort of the really extremes that we had, say, last year. That's all impacting. Yeah -on, on our revised There is a third factor, of course, Christian. It's the impact of Cyclone Gabrielle. Yeah Caution there. You know, we're right at harvest mode. You'll have seen the pictures as well coming out of the Hawke's Bay with, you know, apple trees, you know, up to your waist, so to speak, in water. What impact does that have on our business? That's really a live assessment. You know, there's a lot of unknowns in that space. Yeah, I mean, that. Yeah, that sort of leads me to the second question. The impact of the cyclone. Obviously it sort of unfortunately wiped out a significant part of the horticulture industry in Hawke's Bay, at least, for now. I mean, how do you sort of think about that going forward? Do you, do you benefit from the rebuild, or are you sort of a bit more, or are you worried about, you know, the industry sort of not fully recovering from this? How are you kind of thinking about the more medium-term outlook for horticulture as a result of the cyclone? We're cautious, Christian, to reestablish an orchard, you're talking about a four-year turnaround. Yeah You know, by the time they have infrastructure. A sheep and beef property where it loses a fence line, it can replace those pretty quickly. Orchards are a lot more time-consuming to reestablish, getting infrastructure in place, getting rootstock for vines or apple trees, and then getting those trees planted and into ground and away in production. Soon as they're planted, of course, we start to earn from our clients. It is really too early because some of these areas may not be replanted. There is, you know, we have seen over the last few years a longer-term commitment, the growth of the horticulture sector. I'm optimist. I've been doing this a wee while. The industry will reset, and we have a good, a client base there that is well committed to the industry and, you know, they will reset their business. It could take, you know, the next year or so, you know, given they're right at harvest, there's gonna be a bit of an assessment, but longer-term we have a high degree of confidence. We are cautious over the next year or so around what it might look like for us. Yeah. Okay. Yeah. I mean, 'cause I guess the second half of NZD 9 million of EBITDA is, I mean, is a relatively weak run rate compared to where you've been the last couple of years. Yeah going into next year. I imagine all things considered, are you... I guess it's probably likely that you would be planning for a result in FY 2024 that could be potentially weaker than this year. We're just working through that now, Christian. I. Yeah. We'll just work through that process now. Having said that, we are seeing, you know, further development in other areas around the country, of course. There is, you know, still ongoing investment and good demand for land and redevelopments in both Canterbury and Marlborough and around horticulture and in Central Otago. Yeah, there are other areas that are continuing to grow. I guess the, I guess just the case for a significantly or, you know, for significant growth going into or be it getting back to the NZD 67.7 million EBITDA level next year, I mean it looks like it's probably quite hard. Yeah. It will be challenging. That's right. Yeah. Okay, cool. Just in the agency business, for this year, first of 2023, the revenue was up, but earnings were down. I get. Can we basically attribute that to a mix impact, because the real estate agents or the real estate business is higher margin than the livestock? Yeah, Christian, that's right. It actually, all the real estate business is on a commission basis, whereas the mix, some of the, some of the products that we do in livestock, such as D&L, some of those we've gone principal rather than on just on commissions. Yeah. Okay. it is a mix between the livestock and Yeah. A mix between livestock and real estate. That's right. Then I just had one more question. With, well, I mean, the outlook, I mean, commodity prices have obviously come back a bit in the last few months, but I guess the global kind of growth outlook has slightly improved to start the year. At the same time, costs have just continued to increase more and more. Are you kinda getting to a point where that PGW has to start eating margins, or is it more likely that your margins will sort of hold but sale, it's more gonna be a sales-led decline in growth? Well, guess what I'm trying to say? What's the more likely scenario, a margin-led sort of downturn in growth or a sales-led? Both. You're quite right. I'll just deal with the question in different parts. Hope to answer them fully, Christian. Yeah, you're right. We have seen the commodity prices soften. That's both through horticulture crops. We mentioned apples and kiwi fruits and kiwi fruit, I should say, not kiwi fruits. Sheep. There's probably really early indications over the last week or so that lamb might be moving up a wee bit. We're encouraged by that, but I think it's very early signs. That's due to the reopening of particularly the Chinese market. The commodity prices have risen quite a lot, although we are starting to see a wee bit of softening on some products, particularly in the fertilizer space. There is still some future price rises to come, we believe, based on what we're hearing, particularly products that are coming out of Europe because of some of the power challenges there. Our margins have been relatively stable. If you look through our look through the results when you get to the detail, you'll see that our margin's relatively stable. That tells that we've been, to me, and the feedback we're getting from the field says that our clients value the expertise they are, that we're getting versus, you know, our, some of our competitors. They are prepared to pay for the product, or, and, because we particularly expertise the volume of crop that they are getting, et cetera, the quality of crop, it makes that investment worthwhile. Yeah, we're quite pleased that we're able to hold up our margins with those commodity price rises to clients and, you know, returns to second clients and input costs rising. Cool. Yeah. That was it from me. Thank you for answering the questions. Thank you. Thank you. Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. We will now pause for a brief moment for further questions to be registered. There are no further questions at this time. I'll now hand back to Mr. Guerin for closing remarks. Thank you, Operator. It's a beautiful day here in Christchurch, where I'm calling from. It's some 30-odd degrees. I'm very conscious that we have colleagues and communities in the Hawke's Bay, East Coast of Northland, that are struggling right at the moment. Our thoughts go out to them and our team. We're supporting them. Thank you for listening to our results for the half year. And we'll talk to you again in August. Thank you all. That does conclude our conference call today. Thank you for participating. You may now disconnect.