Hello everybody. It is very pleasing to meet all of you today, and for me to be able to deliver my first set of results for the wonderful company Wynnstay Group. With me is my colleague Rob Thomas, so I will just allow him to quickly introduce himself.
Hello everybody, and delighted to be presenting these results with Al today.
Let's get into the results. I'm sure that everybody would like to hear about our performance in 2024 and the plans to improve this business. I would like to start by saying that there is a lot of headwinds which this company had to manage in the last year, and our focus very much for looking forward is to find solutions to improve a business in areas which we can control. This is a very good start for us, and I hand over to Rob to take us through our focus areas.
Thanks, Al. For people who followed us for some time, you might notice that we've now changed slightly the way that we report our business. We're now reporting Wynnstay's performance in three main business units. We think that this better reflects how we manage the business internally, and I'm hoping that it gives some more clarity and transparency to those who follow us externally, and it gives more insight into how we've performed. We have a feed and grain business. That particular business unit manufactures animal feed, it trades feed raw materials, and it also has a grain marketing business called GrainLink, which effectively procures and sells combineable crops from farmers into the feed trade and other milling trades. We have a fertilizer and seed business. Our Glasson Fertilizers operation is the second largest feed blending manufacturer in the U.K.
We have a seed processing business. We have a seed processing plant in Ashley in Shropshire, and we sell both of those products as part of our category management lines through the Wynnstay brand as well. Finally, we have our Depot Merchanting division. We have 51 stores or depots that are located throughout the United Kingdom, from Helston in Cornwall all the way up to Kendal in the Lake District. Our results for the financial year were conducted against a challenging market condition, and whilst they were in line with our October trading update, we're starting by saying that the results weren't where we want them to be. As part of the presentation, we'll talk about how we're looking to improve, fix, and further develop the Wynnstay Group.
There were some very adverse weather conditions that did impact particularly planting seasons in spring and in October, and that impacted our arable business. Commodity prices have fallen, and as people who understand Wynnstay, they'll know that that does have an impact on our revenue, and that accounted for 90% of the reduction in revenue that we encountered during the year. We did have, notwithstanding these market conditions, some underperformance in our feed and fertilizer businesses, and I'll talk about that shortly. Notwithstanding the income statement, we did have a good level of cash generation. That was a combination of effective cash management and reductions in working capital as commodity prices fell. Our net cash at the end of October is a record for the group at GBP 32.8 million.
Off the back of that strong liquidity, we've proposed a final dividend of GBP 0.119 , and that is a slight increase in the annual dividend to GBP 0.705 . That really reflects our confidence as a board in both the current balance sheet position and our future prospects. We have continued to invest in the group. That's through investing in manufacturing plant. We've got some great news regarding a new fertilizer blending plant that will be opening in Bristol in the southwest later this year. We've completed the second phase of our solar array investment project, which has delivered returns of around 20%, which are very strong and lucrative for the group. We've started our operational transformation program, and we're really excited to talk to you later on about Project Genesis.
As it stands today, we are expecting that the group will perform in line with expectations, and our performance will be slightly better than it has been in FY2024. If we go to the results summary, as I mentioned, our revenue has reduced, and that is a result of falling commodity prices. Feed raw materials and fertilizer raw materials cost less this year than they did the year before, and that meant that our revenue reduced accordingly. Of the GBP 122 million reduction, 96% of that was as a result of commodities. We think gross profit is a much better indicator of our underlying activity and performance, and that reduced by 1%.
The key drivers were a reduction in our manufactured feed volumes, a reduction in the amount of grain traded off poor harvest conditions, offset by some recovery in our fertilizer and seed business, with a strong performance in depots reflecting enhanced profitability off a stable level of footfall. Our overhead base increased in line with underlying cost of living impacts on labor and an increase in our relative electricity costs and power costs year to year. That meant our adjusted PBT was at GBP 7.6 million versus GBP 10.3 million in 2023. As I mentioned, the cash was strong, and we generated a net increase in net cash of GBP 9.1 million. The reduction in earnings per share reflects that lower level of earnings, along with some non-recurring items that impacted the P&L, which I'll talk around shortly.
As I mentioned, the dividend has been progressive, increasing to 17.5 pence per share. We move on now to the business review. In this section, what I'll do is outline the operational key points, and then Al will talk to the future growth opportunities in each of our divisions. Starting with feed and grain, revenue reduced reflecting commodity prices, but there were some lower feed volumes. Total manufactured feed was down 2.7%, and that was mainly the result of lower poultry feed volumes. The key driver from this was less volume sold as we transitioned away from our Twyford site. As a reminder to people, in 2022, we invested in a business called Humphrey Feeds, which manufactured poultry feed and also had a pellets business.
With that, we acquired a rented plant in Twyford, which had an exit date of 2026, and a mothballed facility in Calne. The original business case would be that we would transfer manufacture from Twyford to Calne and develop a multi-species animal feed mill in the south of England. Now, unfortunately, after that, immediately after that acquisition, significant inflation meant that the returns on the project just were not viable. As we reported at the half year, it was unlikely at that stage we were going to develop the Calne site. Al and I have taken the decision that we will not make that development, and in fact, we are looking and we have a potential buyer for the Calne site that we are expecting to complete this spring.
We've also made the decision to accelerate the transition away from Twyford, and production has now ceased at that plant from the end of January 2025. Now, whilst that is disappointing in terms of the feed volumes we've sold in the 12-month period to October 2024, what it does is gives us a stable base to stabilize that business. We've now transitioned volumes, and we have a solid platform to grow the poultry business going forward by manufacturing from one of our anchor sites at the Llansantfraid Feed Mill in Mid Wales, and also through a third-party manufacturer who is partnering with us in the south of England. As I mentioned, reduced grain trading volumes were driven from the second poorest harvest on record. If you do remember, last year, our grain trading operation, GrainLink, had its record year and had really exceptional margins.
They did normalize this year, as was expected. Just to reiterate, within our feed and grain offering, our specialist advisory teams do continue to provide on-farm advice and nutrition, which is really supporting farmers as they become more sustainable, progressive, and more profitable.
We have very large confidence that our ability to grow our business is substantial all over our business. Specifically looking at the feed industry, and I'm looking at the second bullet point on your slide six, we would like to significantly increase the feed manufacturing capacity across our anchor sites, all our production sites. We are talking specifically our Llansantfraid site, our Carmarthen site, but also Tamar. All of these areas have huge opportunity in terms of manufacturing ability to scale up. Projects already have been defined for all sites, and our vision is to increase these production capacities substantially over the next three years. We believe that we've got the ability to scale up and increase our capacity on these sites at least with 40%.
We have strong confidence that we'll be able to sell the capacity created, including to go to the first bullet point, the ability to increase our market share in the poultry area through micro manufacturing sites close by. To also mention that Wynnstay have three trading platforms of which we trade feed raw material in Wynnstay itself, but also in Lansing Grain and in a company called GrainLink. We have now decided to combine the effort of all three of these platforms for the greater good of the company. We have phenomenal colleagues with very specific skills in all three, and the joint effort of focusing on opportunities together in terms of the right time to buy and not will definitely improve the ability of the company to increase our profitability.
Furthermore, our company GrainLink, which is a really strong grain trader, only supplies the Wynnstay company in terms of our feed mills to a small percentage of our need. We believe by using the strength and knowledge of our own teams, we will also be able to unlock potential and margin.
Okay, moving on to our fertilizer and seed business. Results, as I mentioned, have improved over 2023, but I would mention that the comparator there was a soft comparator. Going back to last year, fertilizer raw material prices were reducing significantly off the highs of the 2022 levels, and that meant that margins were adversely impacted. We did anticipate better recovery this year, but unfortunately, adverse weather, particularly in the spring planting season, meant that there were fewer crops in the ground for a shorter amount of time, and there was less of an opportunity for farmers to apply fertilizer. That also impacted our cereal seed volumes, and they decreased year on year. Again, disrupted spring and autumn planting seasons meant that demand was lower.
However, we did see an opportunistic increased demand for environmental seed mixtures, and that was off the back of government-funded initiatives for use of land for rewilding both in England and Wales. We did see an opportunistic increase in both volume and margin in that area, albeit noting that that is a relatively small part of our fertilizer and seed business. In terms of development of the fertilizer operation, we did, as planned, close our Howden site and transfer capacity into the Goole plant. That means that we can service all the needs in terms of the existing capacity on the east coast with some headroom to grow the business, but with a much reduced cost base. I am pleased to see that the benefits of that are starting to come through in financial year 2025.
As you will see from Rob's presentation, we're focusing on both the ability to do it if we do more efficiently, but also the grower business. I'm pleased to say that in spring this year, we will be opening a new, very exciting blending facility in Port of Avonmouth and Bristol. Glasson has historically been operating more in the north of the country, and we have a huge customer base, farmer base in the south of the country, which will also benefit from Wynnstay buying from the Glasson site, but also for Glasson to continue to supply many of our very loyal customers. We are very focused to further expand our advisory services, which are really world-class and give Wynnstay a competitive advantage in the market. We have plenty of capacity left in our cleaning and blending site of seed in Shropshire and in Ashley.
We will use this capacity available for us to focus more on seed offerings and to match growing demand fueled by the government-funded schemes, which is now available. This is a really strong growth opportunity for the company.
Within our depot merchanting business, transactions and footfall were in line with last year. That did show an improvement in H2. If you remember our update at the interims, we had seen a slight reduction in the first half. Pleasing to see that improvement, good signs of trajectory as well going into Q1 of this year. The reduction in revenue reflects price deflation, and that is where we sell certain commoditized products, bagged animal feed, and fertilizer through the depot network. The real success story in this division in the financial year 2024 was the improved margins. That was a management initiative that was brought in to offset some expected higher costs that were coming through that business.
The depot network is one of the highest concentrations of colleagues within the Wynnstay Group, and we knew that we were going to have cost of living increases to labor that came through that business. We also had higher energy costs, and that's because we had come off a contract in 2023 for fixed energy prices, and that sheltered us during the inflation in power costs coming from the Ukraine crisis. It was pleasing to see that we not only recovered those costs, but also improved profitability in the group. As you can see in the picture there, we've got solar arrays now on pretty much every available roof within the Wynnstay-owned asset estate. Whilst that didn't fully shelter us from the increase in energy costs, it certainly helped to cushion the blow and really successful projects, as I mentioned before.
During the year, we launched our click and collect services, which enables farmers to order on our Wynnstay website and have the products available to collect at a set time. We've also increased our direct-to-farm deliveries. We are trying to expand our digital capability, noting that it is a very small percentage of our current offering, but with plenty of scope to grow as farmer trading patterns and the way they operate changes as well. We have continued to see increased take-up of the digital portal from our customers, albeit it's mostly at this stage for account management purposes.
Again, we believe that we could grow our depot just by the numbers we have today significantly. Everything is already in place to advance our category management through our product teams in this area, through enhanced product mix, including additional high-margin project lines. There are some really exciting opportunities there for us currently to continue to strengthen, as Rob said, our digital sales platform. We are benchmarking against best in class in countries outside the U.K., and evidence thereof that up to 20% of sales through these types of depots can be derived through the digital platform. We are right in the beginning of this development, but surely there is a very, very large opportunity as consumer preferences in terms of how they order will change over time. We have many opportunities to expand our footprint in livestock-weighted regions for M&A.
We will pick the right ones when it comes, but there's no doubt that Wynnstay is heavily focused on the depot opportunity. We believe in it, and we'd like to expand it. Our customer engagement strategies to boost repeat business and loyalty are getting substantial and deep focus. I would like to emphasize again, this is a very important part of our focus going forward.
If we move on now to the financial review, I'll start with the income statement. I'm also conscious that in the highlight slides and in the divisional performance, we have talked around a lot of these areas. What I'll do is pick out the key other points. If we look at the income statement, we can see in the revenue where the commodity deflation is impacted by sector, and similarly, those trends in gross profit. Looking further down the P&L, you can see contribution from joint ventures of GBP 0.8 million versus GBP 0.9 million in the previous year. As a recap, we have two joint venture operations, one of which is our feed marketing business called Bibby Agriculture. Bibby is a joint venture with Carr's Billington Agriculture.
It's a feed sales business operating in Wales, and they've had another very successful year, noting that the profit they made in the previous year was a record for that business. They're operating across Wales, but they also have a big presence in South Wales, which is aligned with our strategy to grow our feed manufacturing operations in that region, and we see them as a key partner. I'd also highlight the non-recurring costs. As you can see, GBP 2.3 million versus GBP 0.1 million in financial year 2023. These costs reflect the business reorganization that we've started to put in place ahead of Project Genesis. Of note, we have the cost of effectively the wind down of our Twyford operation. We also have a small impairment of GBP 0.8 million on the potential sale of the Calne site.
There are also some costs associated with the reorganization of our senior leadership team to better align with both the revised operating structures we have and the strategy going forward. Moving on to the balance sheet. Again, I have highlighted the net cash and strong cash position. We have GBP 135 million worth of assets on our balance sheet. That equates to GBP 5.83 per share. At the moment, we are trading just above GBP 3 in terms of market capitalization. Obviously, the activities we are looking to develop the group are very focused on bridging the gap between the two. I would say we have a strong balance sheet in terms of tangible assets, and that is a really strong underpin to the activities that we want to conduct and develop going forward.
I'd also say that we have a really strong asset base, and one of the focuses we have going forward is around utilization of the existing assets we've got. We believe we can much improve returns from the asset base, and that's something we'll talk about. If we look at our return on net assets, this is again aligned with our revised segmental reporting. As you can see, reduction, particularly in the feed and grain business for the matters that we've discussed previously, some recovery in fertilizer and seed, and the depot merchanting has had a strong return. Our target is to clearly get the return on net assets higher to better align the net earnings at an adjusted PBT level with the balance sheet strength of the group. On the cash flow, our operating cash flows were strong.
This was driven by some good working capital development and management. The net cash generated was GBP 9.1 million. Capital expenditure was lower than in average years at GBP 1.2 million. That was timing because we completed some significant projects in 2023, and there was a period while we were taking stock ahead of planned projects for 2025 and beyond. We maintained our progressive dividend, and that totaled GBP 4 million, a slight increase on the last year, reflecting that slight increase in amounts. The next slide shows a graphical representation of our cash flows. You can see there the EBITDA generation and working capital generation and how we deploy funds, and that is through strategic investment in CapEx. These repayments reflect where we have used HP financing to fund development of the group. We pay interest and tax, as you would expect, and then we have our dividend.
One thing I would highlight is that despite the strong liquidity position, we do have a cycle of working capital in the group. That means the highest reported net cash position is normally at the end of October. I would say that throughout the year, we traded within a net funds position, and that also includes on an intramonth basis where the timing of receipts and payments can vary. We also have, I believe, suitable cash to deal with any potential increases in commodity prices and to also develop the group going forward. Talking about group development, we've spent a lot of time over the last six months in particular looking at our capital allocation policies. There are a number of areas where we can look to develop the group internally through either enhancing efficiency or focusing on organic growth.
A lot of that is focused in our manufacturing facilities, but there are also areas where we can focus on deployment of platforms and other systems. However, we've got a number of initiatives, and we're setting ourselves some fairly stringent targets in terms of investment to ensure that the money that we deploy is improving the return and getting it significantly above the level that we're currently at to improve earnings and better generate returns from the balance sheet we have. We're also conducting an asset review where we're looking at existing infrastructure and making sure that that is generating the returns that we want and are appropriate going forward.
There's some really exciting opportunities to invest in advanced manufacturing technologies, and that can really help reduce what are the fixed costs of a manufacturing operation to mean that we're efficient and we can both increase capacities, but also lower net costs. We are very interested in consolidation of what is a large stable market across all of feed and grain, fertilizer and seed, and depot merchanting. We see value-enhancing acquisitions as a key part of that. It goes without saying that as a leadership team, we're very focused on making sure that any acquisition is done at an appropriate price or an appropriate multiple so that, again, capital deployed in that area gets the necessary returns to improve the performance of the group. Finally, we understand that the dividend is a significant valued attribute of a Wynnstay share for our shareholders.
We have a history of paying progressive dividends, and that is something we will continue to be focused on, and that is incorporated into our capital allocation decisions as well and factored into future cash flows.
Thank you, Rob. Let's look forward. The year's behind us, we would like to improve our business. How do we do it? First of all, in terms of growth, we believe that we can grow our business substantially, and we will. Growth always has to start with organic growth. It's always the safest place to start and the cheapest place to start. We have several opportunities to increase our market share across all our key areas of operations. We will do it by expanding the manufacturing capacity. We will also do it by using capacities which are in the group and historically have never been used for manufacturing outside that, as an example, the Glasson business, to expand our manufacturing capacity to help us to focus on new customers and older customers in a better way in that area.
The expansion of our manufacturing capacities, both in [Comarvin as well as Lansing Drive], but also in Tamar is definitely on the cards. We will continue to enhance our product offering and services as part of this organic growth. Our expert advice, which we have done so successfully in the past, will continue with quality advice, which deepens the relationship with our customers. Our specialist teams assist customers in improving their business, and our focus on that is very, very, very targeted going forward. We will continue to promote profitable, efficient, and sustainable food production. As Rob has indicated, acquisitions have always been part of the Wynnstay growth and will continue to do so, but only if it aligns with our strategy and aligns with the growth strategy of a business.
We will be targeting accretive acquisitions that complement existing areas of operation and add value at the right price only. We believe our technology will play an even bigger role in decision-making of our customers, our farmers, and of investing to take advantage of these opportunities and to align the group with shifting customer buying habits. Engagement is now very relevant. Sustainability will continue to be a core focus of our business. Sustainability in U.K. farming is now a more dominant theme driven by the change in government support schemes post-exit of the European Union, and Wynnstay is aligning itself with this fundamental change, and our target remains to be net zero by 2040. We have now been talking about growth, but also we have to focus on how do we improve what we currently are doing.
It is the opinion of the executive leadership team and the broad-based leadership team of the company supported by the Wynnstay Board, but there are so many areas. If we just marginally improve it because of a volume we are putting through the business, it will enhance our profitability. We felt that the best way to deal with that is to do it formally through a project with proper governance, and therefore decided to call it a name. We call it Project Genesis. We've been asked many times why the name. It's just because we are starting right in the beginning again. It's time to stop, to think, and then to rebase. This is now the chance to do so. This is a well-thought-through program, well-supported from the top to the down and from the bottom up again, and widely supported in our business.
It's a three-year program of operational transformation. It's already started. It will drive efficiencies, it will reduce costs, and it will establish a higher base level of profitability as well as support wider plans for growth. The opportunity, why are we doing it? It's to significantly improve a group's financial performance and return on assets, to strengthen the Wynnstay position in the agriculture supply market, to better capture the potential of future value creative opportunities through M&I, and to enhance return to shareholders. Our core objectives with Project Genesis are to simplify operations, to remove unnecessary costs, and to enhance efficiency. We have established a new management structure, which is more fit for purpose for where we are today and for the future. We are now creating a more scalable sales model to optimize revenue and to better serve our British farmers.
We are building greater resilience to external pressures, including market volatility. These are the stuff we can control. Obviously, there are stuff like the weather, like decisions by politicians, which we cannot control. Our focus should be on what we can control. The key outcomes over the next three years will be operationally stronger with improved commercial focus. We will have increased gross profit. We are planning to lower operational costs, to increase our net profits, and to increase our cash generation. Therefore, this will enable us to enhance our market presence with a robust platform for growth.
How we'll drive value, as Alex mentioned, it'll be over a three-year period. We have split the project into three phases, and we're currently in the design and initial implementation phase.
This is really where we've set up workstream with project leaders who are now doing bottom-up plans to look at how they can design and implement and set targets for improvement across various areas of the business. We'll then move into a core implementation phase. That's where we expect the project to deliver real value in 2026 and 2027. From 2028 and beyond, we'll have a platform which is optimized and is able to accelerate growth and scale the group into the future. As Alex mentioned, the primary focus is to increase gross profits, reduce costs, improve our net returns, and cash generation.
What we're looking at here is simplification and integration of the group, alignment of our management functions and our core functions overall, so making sure that we have simple structures of sales, manufacturing, category management, and support, which are covering all aspects of our operations, whether that's a feed mill within the feed and grain division or whether it's a seed processing plant within the seed division. They will be under a common manufacturing leadership structure. Similarly, with logistics, that will be managed across all aspects of the group, regardless of the nature of the business or the branding or statutory entity it had historically operated in. Again, there will be some simplification of systems to make sure we have a common operating method across all aspects of Wynnstay.
We talked previously around operating our trading division off three platforms that will be consolidated and that will drive both efficiency, but also productivity benefits. We will focus on those manufacturing efficiencies, the benefit of our trading functions, better procurement across the group, logistics, and we are really aiming to have a leaner, more efficient, better performing, and focused group as we transition through the project.
In front of you, you will find a very, very busy slide, which I am not going to unpack in totality. One thing which is important to say is we, as a business, have made some promises and unfortunately did not deliver it. We are sensitive about that. We are well aware that the more information we provide in presentations like this, the more accountable we all will be, which is the right thing.
In front of you, you will see again what Rob has just done, but expanded a little bit more. We are now in design initial implementation phase in 2025 of Project Genesis. We are now busy simplifying our sales structures and aligning it with all the trading regions. We are consolidating the group, feed wide and grain trading wide, integrating young animal feed just to become part of a business. A total consolidation of our facilities, including Glasson, under one Wynnstay manufacturing leadership team to fully utilize the existing asset base. We've got very, very specific activities, including fixing operational issues, addressing our bottlenecks in manufacturing processes, which we are several, focusing on efficient manufacturing principles, and focusing on supply chain inefficiencies to improve it and then to properly match our capacity with our sales opportunity and therefore our demand planning solution. Our plans for growth are several.
By increasing our anchor site capacity, we will potentially increase the volume with up to 40%, which we are confident we can sell. It will require some investment, which we are planning for, to increase this capacity, and that will take place in this financial year and the year after. We would like to see a manufacturing modernization process to improve all efficiencies on these two sites, but also in Tamar and on Glasson Dock. The benefits will be to have a leaner, more responsive business, able to meet the demands which we have in our business, to strengthen our supply chain resilience, more capacity to support our sales opportunities, and results and cost focus will bring initial earnings improvement, and that will increase then every year from now on. I will not go into the detail of 2026, 2027.
I'll say just thanking you as investors again for the confidence you have in us. It is the responsibility of a leadership team to look after every penny of our investors, and I hope you will see that this initiative will definitely unlock so much potential to help us to stabilize the business and to deal with the volatility, which is so always part of the agricultural industry.
Okay, so in terms of the summary and outlook, it was an underperformance really in challenging markets, but we think we've made some really important structural changes and decisions, and we've got the right strategy and application of that strategy to really take the business forward and unlock the fantastic potential that we have. We've generated good cash flows, we've got a strong balance sheet, and that gives us both the opportunity to develop the group, but also maintain focus on growth and also on dividends. We've started our operational transformation in Project Genesis, and we're really excited about what that's going to develop going forward. We've continued to invest both during the year, but with also some exciting developments going forward, particularly around the Bristol plant, and we have maintained that progressive dividend, taking that up to GBP 17.5 per share.
In terms of farm gate prices, they've been strong, particularly in the second half, and we expect them to remain robust. As I mentioned, as it stands today, performance year to date, and also in terms of the outlook, we would expect FY25 to improve over FY24.
Before we hand over for questions, I'd like to say again, ladies and gentlemen, that 2024 was a year which was difficult, but we are looking forward to good years ahead. I thank you for your investment. The team understands the responsibility we have to always not only look after our investors, but also to look after our very, very special customers, the British farmers. Thank you for your confidence in us. We will take some questions.
That's great. Thank you very much to both Alk and Rob. What's the board's approach to the deployment of cash generated, considering both the desire to pay the dividend and the requirement to invest in the business? What changes have you made to your investment assessment process, and should we expect the group to increase its return on capital employed?
Rob is going to answer the question in detail, but may I just start by saying that in a company which has got such a lot of potential, but also various views of investors, we always have to be careful not to make any emotional decision, and everything needs to be filtered through a proper analysis. I am very happy to say that Rob and his team have come up with a very good capital allocation framework, which he will take you through now.
We have a framework, and we spent a lot of time, particularly over the last six months, really looking at where we should be deploying capital. Having that framework and considering that has helped us because as part of the project and also development of the group, there's a lot of areas we can spend funds. We do have funds, but you can only spend the pound once. We have to make sure we're looking at the right projects that deliver the right returns to give us the best immediate return, but also on a sustainable basis going forward on a long-term returns basis. We also need to look at what can get us the highest return for the least effort.
These are all kind of things we're looking at, not only in terms of pound notes, but complexity, ease of delivery, and what fits within our core operations. As I mentioned before, focuses are around internal efficiency, how we can reduce costs, particularly within manufacturing. Some of the exciting things we're looking at, for example, are alternative sources of fuel for boiler energy in feed mills. Some really interesting opportunities there that we're pursuing. What can we spend to enhance capacity? And when we enhance capacity, we're really focused on lowest costs, but also looking at what is the incremental business that we can generate and can we sell that. For example, there are certain parts of our business where we know that our demand is outstripping our supply potential, particularly bagged feed in depots and supply of dairy feed in South Wales.
As people have mentioned, the dividend is a key part of that consideration. When we are making these capital allocation decisions, we're looking at the available funds we have. We operate short-term 12-week cash flows. We operate a longer-term funding forecast. In that, we look at operational cash flows. We look at what we expect to spend in terms of interest to service debt. We look at what we expect to pay in dividends, and that's all factored in. The other thing that we have to be very mindful of is as commodity prices increase, that is a drain on our working capital. We make sure we've got assumptions around what could reasonably possibly happen within that area. We also have to look at the intra-year cycle on our working capital.
All investment decisions are looking at the lowest point in the cycle with potential movements in working capital, looking at what's available to spend, incorporating dividends, and then looking for the best returns thereon. We've had a number of questions, as you might imagine, around IHT, asking about its impact and whether it represents a threat to the business.
Could you talk a bit about the IHT changes and what impact you think they're having on the industry and on the business itself?
Clearly, they had a very negative effect on the sentiment of farming. Like any investor, a farmer, if he's not fully confident that it's a good investment to make in his farm, will not do so. It is a bit early to say, and for now, it's very emotional. What we need to do as a business is to stay close to our customers and to be a good friend for them and be a good supplier for them to enable them to navigate through those difficult times. It is very difficult to predict what the outcome of this is going to be. At the end, British farmers are doing an outstanding job, as good as anybody else in the world, or better, helping to supply British consumers with vital food products, a critical part of the supply of food.
They need to be supported, and we will do absolutely everything to be a friend to them.
Next question is, under previous management, the return on capital has been on a long-term downward trend. Two of your three segments show a low return on capital. What is your return on capital hurdle for the planned capacity increases in those segments, and why will that return be better than the return on existing capital?
Returns are lower this year. In terms of a long-term decline, actually, I think there are certain years over recent history where returns have been very high. What I would say is that there has been some volatility in that period. In terms of looking at future investments, we have our own internal hurdle rates. What I would say is that clearly we want returns that are substantially higher than our own internal rate of return, and they are substantially higher than the published returns that we have currently got. Why we think we will get better returns than in the past, we are looking at investments that will reduce our cost base. We are looking at returns that will make our group more efficient.
I think one of the key points around Project Genesis is looking at the group as a whole and looking at investments that are beneficial to the group as a whole rather than assets in isolation.
We've also had a couple of questions around CapEx and asking whether, I think probably Rob, this is again another one for you, I'm afraid, some indications on what CapEx might be in the years ahead.
We're forecasting cash CapEx of GBP 7 million for each of financial year 2025 and 2026. To give you some ideas, our maintenance CapEx, if you put any net disposals to one side, is normally around GBP 4 million per year. We deem our GBP 6 million worth of additional CapEx over and above normal levels to develop the group. That is focused roughly in two areas, between efficiency benefits in manufacturing, so investment in lower-cost manufacturing technologies, and then investment in expansionary CapEx to grow capacity, primarily within the feed mill operations. It also includes the CapEx associated with the fertilizer blending site in the Southwest, albeit fertilizer blending operations are a reasonably straightforward and low CapEx development.
Can you please state the range of cash held during the course of the year, i.e., peak to trough cash or net debt, and how will this change over the next three years?
We have high points of cash in October, so that's GBP 32.8 million. Our low point on a monthly basis is at the half year, and the half year just gone was around GBP 18 million. That gives you an idea in terms of the intra-month or intraperiod swing. Within the month, there are further cycles. We often pay for materials in the first week of the month, and we collect cash from our farmers in the third or fourth week of the month. At the low point, we were around GBP 5 million in the year. Clearly, we've operated within net funds for the entirety of the financial year just gone. On top of that, just as background, we have a GBP 10.5 million overdraft and a GBP 10 million RCF with a GBP 5 million accordion.
We have some substantial headroom over and above the low point in the cycle.
A large nearby competitor also earns low margins on feeds and are diversified into higher margin businesses. Why are you so confident about expanding capacity in feeds?
Every company needs to pick their own business model. We are not an investment-oriented company, and we will not be distracted by stuff which is outside our main focus, which is to supply British farmers with good quality product. That is a choice we made. We feel confident by doing it well, but by doing it in a wider scale, we can create significant returns for our investors. That is the one we chose to take. We also have made the decision because we know that there are several improvements we can make in what we currently do. Also, we feel very strongly that the market is consolidating very fast, and those who are specialized and focused will be able to capture that better than anybody else.
Please could you give specific examples of improvements from Project Genesis that will improve profitability?
We selected off the wide consultation bottom up and top down nine areas of improvement. For the sake of time now, I will just explain one. We would like to improve the way we do our logistics and deliveries. There are some inefficiencies in it. We not currently have a model where sales, demand, manufacturing process, and logistics are aligned. In there, there are several opportunities for improvement. We set some KPIs against all of these, and there will be an outcome of that with an improvement, which is in financial terms. Collectively, that will add up to a number which we will then multiply over volumes we do in the business. That is a very specific area of improvement with a quantifiable benefit against that. There are several others as well, but we will not have the time to discuss that today.
I can assure you, these are headed up by functional experts which are definitely going to deliver the benefit out of it.
Our next question is, in another call, you mentioned that some properties are still valued at 1950s values. How much potential upside in million pounds is hidden from the balance sheet?
It is true. We have certain assets that are valued on a very historic cost, shall I say. The rule of thumb we've applied is that there's around GBP 10 million worth of excess property value. In simple terms, I look at the fact that there's potential valuation uplifts on properties that offset the value of intangible assets on our balance sheet. When I look at 134.8 million, I'm looking at a bricks-and-mortar value with liquid working capital resources on top of it. That kind of justifies the asset-backed nature of our balance sheet.
We've got a question around seasonality. What are the seasonally important months, and does very dry weather have an equally bad impact on you as does very wet weather?
Rob, do you want to take that?
Yeah. We are just coming into now what is our key seasonal period. As we get into planting seasons, spring fertilizer season, that also corresponds with the lambing season. We have our peak feed manufacturing and selling periods. We also sell an awful lot of sheep feed through depots. Depots have their most important trading months in the spring. The other key periods are the September and October period when we get into the harvest time, the autumn planting seasons, another round of seed sales and fertilizer sales. In terms of, yeah, look, agriculture is volatile to weather. As much as being too wet can harm us as can too dry, we have very experienced teams who look to make sure that they can manage these conditions as best as possible.
We have a balanced business model that we've talked about previously. We are not exposed to one particular sector. We have arable, we have livestock upbrings, we have the depot network. The key thing really in the project is looking at what we can control. I know that we can better apply our distribution to save costs. I know that we can coordinate our feed trading teams. I know that we can be more efficient in manufacturing. It does not matter whether it is too wet, too dry, too hot, or too cold. Those are activities that we can undertake and we can make improvements.
Next question. You may have covered this in your comments around return on capital, but the question I was asked is, please give your comment on the reasons for the long-term decline in profit margins at Wynnstay and what actions will be taken to restore margins.
In terms of long-term decline, I'd maybe question that because if you look back at particularly in 2021, 2022, we had some really strong upticks in margins. I think the point is that we've got volatility in margin. I think the other point is that in recent past, we have seen squeeze on margin and profitability. I think there is some causal there because of the disconnect between commodities that impact our top line and gross profit and cost of living inflation, which continually goes up and impacts our cost base. We think that we can get a grip of that in terms of trends and also improvements by getting control of the cost base, unlocking efficiencies, and offsetting any cost of living increases through efficiency drives and hard savings.
We also think that the scope to grow our margins through more products, more value-added products, and also offering the right things to farmers in each of our three divisions.
On the depot business, how much is M&A likely to feature in its growth? Can the network be doubled over the next five years?
Yeah, let's start with the last part of the question. Undoubtedly, it can be increased. Like any M&A activity, we will only do it if it makes sense. We will not engage in territories where there's no potential or low potential. Like anything else, we will pick them as they come. We can definitely increase our growth in our business through increased depot numbers. I'd also like to say that we can increase our growth through our current base of depots, which still have lots of space in terms of ability to look at the products we sell there, different ways of attracting farmer interest by being more active with our farming network. Both adding more, but doing more with what we've got is possible.
I can't see any more questions at this time. We're just over the hour. I'm afraid we're going to have to wrap it up there. On that conclusion, I'll hand back to Alk for any final closing remarks. Alk, go ahead.
Some people said to me that you could not have chosen a more difficult time to join Wynnstay. I'm saying I could not choose a better time because we've got so much potential. This is a great company with great assets, great customers, great investors. Thank you for your confidence in us. We will do everything we can and more to improve the way we run our business. We understand the responsibility to all stakeholders, including our customers, the farmers, and our investors, and all our colleagues in the business. Thank you.