You are welcome to submit a written question using the Q&A tab at the bottom of your screen. You can type these in at any time during the presentation. Wynnstay provides a range of agricultural products, inputs, and services to U.K. farmers, mainly in England and Wales. That includes animal feed, seed, and fertiliser. 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 nine months and Rob as CFO for about a year m ore than that. T here's clear evidence of progress and we're starting to see the benefits of their strategic changes. 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.
Please go ahead.
Good afternoon, everybody. I'm delighted to report our first six months of this financial year's result together with Rob .
Good afternoon.
We will get right into it. Our purpose is to be the supplier of choice for British farmers. At the end of the last financial year, we have decided to change our segmentation to have three new ones: Feed and Grain, Arable, and our stores. We will be discussing our results through this presentation in that format. In terms of Feed and Grain, we manufacture and supply feeds mainly to livestock farmers. We focus on feed, raw material trading, and then on our grain marketing services. Our Arable offering is mainly in seeds and fertiliser, and 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 three of these areas, and I'm delighted to say that today we are going to start indicating improvements in all these areas.
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 three 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 firmly on track. Our work streams are now mobilized and the teams are busy executing their plans. 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 fertiliser blending plant in Avonmouth, some energy efficiency investments we've made at our Llansantffraid 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. Finally, and importantly, we're on track to deliver our full year forecasts which will mark an improvement over last year's financial performance. Looking at finances in a little more detail, our revenue reduced by 7% half 2025 versus 2024. Those of you who follow Wynnstay will understand that our revenue is driven by stock commodity prices and those did reduce year- on- year which brought our revenue down. 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. We have gained some market share, but our activity and 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. 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 18.4 pence per share which is up 29%. As I mentioned, the balance sheet remains strong with net cash at 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. 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 5.7 pence, which is that 1.8% uplift from the previous half year. Looking in turn at 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.
As I mentioned, all three segments showing improvement on H1 2024, notably with Feed and Grain and Arable, the half- year performance is already ahead of the outturn from the previous October. Stores at GBP 3.1 million showing that continued improvement in what was a relatively stronger performance from the store division in previous year. Our contribution from joint ventures relates to our core investment in Bibby Agriculture. Bibby are a feed sale and marketing business based in Wales, a joint venture with Carr's Billington Agriculture Ltd. Bibby have continued to have a really strong track record of performance over the last three years and pleasingly this year- to- date they're showing improvement and our share has improved as a consequence of that. If we look at net finance costs, they're marginally lower than H1 in 2024. That's a function of lower interest rates.
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 loans. 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. We're underpinned by a strong asset base and we've continued 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 board approved plan and we continue 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 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. As you can see, 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 Arable stores, maybe less so. Our ambition is for each of those segments within the next 18- 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. Just as a reminder, on top of our net cash position, we have committed cash facilities of a GBP 10.5 million overdraft and up to GBP 15 million worth of 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 points really here are that unwind and forecast higher position at the end of the financial year relative to the H1. What we'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. 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 and percentage basis, much improved, and the adjusted PBT is more than double 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 leased Twyford mill facility.
We're pleased to report that that was completed at the end of January on plan and on cost. 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 will save us up to GBP 1 million on the 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. Looking at this very important part of our business, we have highlighted before that in the past we ran our business very divisionally, or if I might even use the word siloed. We now have an integrated focus. All our sales teams regionally are focused to drive volume growth. This initiative has started from February and is part of Project Genesis. Already we are seeing some really, really good promising opportunities because of that regional focus. We have got an integrated trading team well placed to capitalize on an unnormalized grain market. What I mean with integrated, again, as historically mentioned, we tried it from three different platforms before, namely GrainLink, Glasson, as well as Wynnstay.
These teams have been put together into one virtual community, and the benefit of them working together in an integrated manner is showing some very promising upside opportunities and also the ability to manage risk much better. We have already made two major investments in terms of this year signed off by our board. Both these investments are to support efficiencies and growth. Before I mention the two, everything we do and all decisions we make are with a view to improve our return on capital employed in our business, which we realize is not high enough. We set ourselves some ambitious targets. Every decision we make in terms of investment needs to underpin not only making the segment more profitable, but to help us to get that important ratio, to get the return on capital employed to a much, much healthier position.
The investments we made so far in this financial year are, 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 in that continuous flow of a business. The upside of that is, which we believe by November this year this program will be completed, it will help us to increase our capacity from this plant by 20,000 tonnes, and we have a strong ability to sell that capacity very quickly after it's available. I am 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 paying currently and also will help us to get to the ability to make this part of our business much more profitable.
Moving on to our Arable segment, and as a reminder, this is our fertiliser manufacturing, fertiliser merchanting, and seed processing segment. Pleased to report that this was a volume and margin recovery which drove much stronger PBT. Revenue up slightly at GBP 71.4 million, but some clear improvements in gross profit at GBP 6.7 million and a GBP 1 million improvement at the adjusted PBT level. Fertiliser 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. Again, strong pricing discipline in volatile markets. Our teams have got a proven track record of being able to navigate the fertiliser markets, particularly when they are rising. It's that ability to capitalize on margin opportunities and drive performance.
Also, very pleasingly, our new fertiliser blending plant was completed in Avonmouth, and that was completed on time and on budget. That was approved in September, commissioned in March, and live in April. We're very pleased with that execution, both in terms of speed, but also discipline and how we've managed it on cost.
The investment in Avonmouth, which Rob just spoke about, Avonmouth next to Bristol, will help us to have the ability to sell an extra 65,000 tonnes of new capacity. As Rob has indicated, very proud that that facility was from planning stage to execution on time and within budget. We now have upside to sell that capacity. This Avonmouth facility is under the Glasson F ertiliser responsibility. Glasson F ertiliser, as you know, is our wholesale business, selling to wholesale customers, but also has 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 fertiliser business in the southern part of the country. Without any doubt, we strongly believe in our ability to expand our seed sales.
We are particularly very, very strong on grass seed and we have a very modern seed cleaning and blending plant in Shropshire, in Astley, which is only utilized partly. There's still a lot of capacity available. The upside of putting more business through this plant and selling it will not only have a sales margin opportunity, but also help us to cover our fixed costs even more in that plant. We strongly believe in our ability to broaden our Arable product range on a wholesale basis, both on seed and fertiliser.
Finally, moving on to our stores. Stores have continued with a solid performance, generating good cash flows. Revenue increased to GBP 73 million. That was based on broadly flat footfall and 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. GPB 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. We believe that there's further opportunities to develop the performance of these stores.
Investors, margin improvement through improved systems and buying leverage is a key area of our focus, and the talent in our team is strong. The ability and the initiatives of our teams locally in all these rural locations will surely help us to get to this goal. There is definitely opportunity to really look at our product mix and serving 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 our Wynnstay manufacturing offering to increase both market share volume as well as our profitability. We have to continue to invest in our multi-channel 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. Although the U.K. is slightly slower in adapting to a digital platform, Wynnstay will be ready to benefit from the opportunities when it comes. I'm delighted to talk to all of you now about Project Genesis and the opportunities within Project Genesis, and I want to highlight again where this came from. 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, because we are working with investors' funds, and therefore we have to provide our 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.
The experience of these types of turnaround projects has been that if it's not specific and detailed, it becomes just a hope and not an action. 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, and that even marginal improvements multiplied over many thousands of tons make a big difference. We started a bit on the back foot because I joined in the beginning of our financial year, and 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. We only signed off Project Genesis in January or 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, or although there is already upside seen in our results, the real upsides will always come in the next two years when it's about core implementation and to accelerate our growth. The whole basis of this is to improve everything we do to make the 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. Project Genesis is really about a basis for expanding earnings and growth. We have nine work streams we work into, and you will see that to the left starting with revenue growth and margin improvement, etc.
We set ourselves very specific targets for year one, and we do the same for year two and three. Just to share some of the targets we set ourselves for year one 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, so look at every single asset in our business location-wise, but also within the location with specific assets. Number one, to see that it will give us the return on net assets which we require. Number two, that it is scalable, and number three, that it's actually been maintained properly. We've done and completed that review. We have a very strong opinion about which assets are worthwhile investing in and which ones potentially are not.
We also know within a geographical area like Carmarthen where we have to invest because we have certain bottlenecks and lack of efficiency in certain parts of a continuous process. We know now where the best opportunities for investment can be. We have simplified our sales structure and aligned it to our regions with very specific focus and targets. Our feed raw material trading teams are now integrated on the one platform, and from the beginning of November we'll work on a common platform of decision making as well. Our consolidation of our manufacturing facilities under one manufacturing leadership team has been completed and has been very successful. Everything which has to do with making a product is under one leadership regardless of in which segment it sits. The benefit of specialty and focus and the reduced cost base will be evident in the next two financial years.
Phase I of our manufacturing capacity uplift in Carmarthen has been approved. We will actually create the extra 20,000 tonnes which we are sure we can sell. A small part of our business, Youngs Animal Feeds, we've realized that this company cannot be a standalone business. We've successfully integrated that at the end of our last six months. The benefit of that will be seen in this next six months.
Okay, we just want to move and touch on our strategic proposition before I'll conclude with the outlook. We've talked a lot around Wynnstay as a business, a long-standing business, 107 years old this year, and that has 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. As Alk mentioned, we've got growth ambitions and 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. 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 fertiliser, 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. 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 in 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 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.
Markets and weather patterns will always impact a business like Wynnstay , but we want it 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 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. We're very, very focused on improving our return on capital and return on net assets. We believe that from that, there's 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. Moving into the summary, we've made a strong financial recovery across all three 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 three 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.
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 in a position to deliver a 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 Ask Investors. For us, it's important to highlight that this is a plan which we believe in, which we believe we can execute, and which addresses both the improvement on our cost waves to make sure we operate this business at the lowest possible cost. Improving our margins, removing inefficiencies and lack of productivity in our business. It is also a growth story. We believe that the assets which we have are great assets which are scalable. We believe that because of a fragmented market we operate in, we can expand our market share and our profitability in all three of these segments.
We believe that for now these three segments are independent of 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 three of these areas because there is no reason why we cannot be strong in all three. We have a very strong customer base, which we indicated in the beginning. We have a strong marketing approach for our CRM system to capture more business with current business. We also believe in our ability to continuously 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 tactically and wisely the best investment is to look after our current asset base first. We are confident that over the next six months that focus will give us the returns and the confidence then to actually look at other opportunities when it might come. Right now we stand by the expectations which we all agreed in the market. We are conservative in our approach because we realize that in the past we have disappointed the market by not always getting where the market expected us to be. For now, we are determined, be cautiously moving forward to improve a business every day, every month, every quarter, and every year under our leadership. Thank you for listening.
I hand back to Gareth and we can take some questions.
That's great. Thank you very much to Alk and Rob. As a reminder, please do feel free to submit a written question using the Q &A tab at the bottom of your screen. We've got a number of questions already submitted, so I'll start to work through those now. First of all, we've got a couple of questions clustered around capacity. The first one is, what is the current capacity at Carmarthen before the extra 20,000 tonnes? What effect does seasonal demand fluctuation have on utilization of this capacity?
Yeah, before I even 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. 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. Our capacity in Carmarthen is 140,000 tonnes, 140,000 tonnes. During the busy times we're running at full capacity. 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 our downtime in the mill because of breakdowns and certain parts of equipment failing us has been significant. Just by improving and replacing that, we believe that we will get an upside of 20,000 tonnes.
That's on top of 140, and we call it phase I, which indicates that there can be a phase II and III. If we look at that additional capacity on top of the 20,000 tonnes, it will only come under two conditions. One, our commercial plan needs to support it, so we need to be sure that we are able to sell that extra capacity. Secondly, back to the remark that we will always be focused on getting a return on capital employed, which is much improved by where we are today. The ultimate wish list, not a promise wish list, to get to close to 15%, that needs to be aligned to that. If we do create extra capacity, we will factor in how much we can extra sell and what the returns on that will be. I'm confident that the investment we made will definitely take that part.
Okay, that's great, thank you. There's a related question which you sort of touched on, but I'll ask a question anyway. 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. I have to be clear that there's a difference between a wish list and something under investigation or under consideration and something which has been signed off. 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 now 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 those 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. Our three groups of stakeholders are really our 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 they work under conditions which are safe and modern, that some of the investments over time will be made to make sure that that is the case.
Secondly, we have a responsibility to look after our assets well because decisions we make today and if we make the right decisions today will benefit the company over decades and not only short term. We will not neglect the responsibility of investing in proper maintenance in all our assets. Rob, if you want to expand on that.
Yeah, I'll just provide a little bit more color. As Alk mentioned, we're committed to a capacity improvement plan. That's a GBP 500,000 investment that will generate the 20,000 tonnes of capacity, and based on our expectations, that will deliver us around 15% return on net assets. While we haven't, as Alk mentioned, formally signed off on any expansion plans, what we do have is the efficiency investment in terms of the Combined Heat and Power generator. That's a GBP 1.5 million investment that will generate around GBP 500,000 annualized savings. Quite a compelling payback period in terms of that one. As we mentioned from the outset, the Avonmouth facility investment there was around GBP 700,000. Once we get into it, there's a phased ramp-up time in terms of year two and year three, but after three years we expect to be at that 65,000 tonnes of full capacity.
At that level, we will be generating the 15% return on investment.
Okay, that's great. Thank you. We've had a couple of questions emailed in, one around Project Genesis. How has Project Genesis been received internally?
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 in. There's a huge drive from our teams all over the business to be part of a success story. The important thing is right from the beginning, we spend a lot of time on talking about the why, why do we need to change, why do we need to do things better. I'm incredibly encouraged and motivated by the support of all our teams through 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. Right now our teams are absolutely focused and we don't really, I'm talking internally now, really 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, thank you. Next question. Is the poultry business now on a firm footing? Can you just elaborate please on how you're meeting your supply requirements?
I'm also going to ask Rob to join me on this one. The answer is yes. When we exited Twyford, our single goal was to make sure we protect all our customers. 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 could deliver from Llansantffraid to our Llansantffraid mill, and from there we deliver to a big percentage of our customers. The rest we've outsourced, and that is stable with a very good relationship with our third-party manufacturer. That's a holding position in terms of what we want to do with poultry. It was the best option of all the options on the table at the stage when we had to make the decision.
Now we're actually looking at how do we grow our poultry market share. That is being discussed at the moment. We are delivering a new five-year strategy to our board in August this year for the next five years. Our growth plan in terms of poultry supply and manufacturing is going to be part of our discussion. 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 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 because you'd understand we've got to assess what's the most profitable way of growing that business. There are certainly options and 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. 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 three segments of the business? When you state 15% return on net assets at capacity, what are the implications of seasonal demand fluctuation on this return?
Yes, there's a bit to unpack there, but I'll just write that down in terms of, yeah, quite right. Our return on net assets definition is our PBT, albeit adjusted PBT. That takes out any non-recurring items and non-cash items. The adjusted PBT level is actually consistent with our definition for bank covenant reporting as well. PBT is divided by net assets on the balance sheet. When we do that for our segments, we allocate assets across the balance sheet to the segment that they relate to. For certain core anchor sites specific to a segment, that's easy. Where we have corporate assets or shared assets, we make an allocation. We've spent a lot of time on that over the last six months and we're happy that we have a fair, reasonable, and sensible allocation.
Just in terms of giving some further context, we do drill down to look at return on invested capital, taking net profit after tax as a proportion of invested capital. Just for some guidance, 15% return on net assets is circa 12.5% return on invested capital after tax. 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. The ambitions are for each segment to have clearly higher than 10%. We think that's achievable within a sensible time frame through the initiatives of Project Genesis capacity and through development.
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'd invest in a particular project or segment.
Okay, that's great. Following on from that, it's a different question but it's sort of a related theme. The question is 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 Project Genesis or whatever else you see getting you towards those numbers.
Yeah, I mean I think it's just in terms of, you know, 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 in equates and between the two. When we looked at Project Genesis, the thesis was we've either got a balance sheet which is too heavy or is it forward earnings and results which aren't high enough. We firmly believe it's the latter. We also think through fairly straightforward common sense 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 segments.
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're just at the moment we're focused on, we've delivered an 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. We're then working on our five- year strategy detail plan bridging Genesis turnaround into the longer term strategy for the business. 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?
The whole question of acquisition is a complex long discussion which we probably don't have time now. It all starts with what do we do about cash. 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, profitably, and efficiently as possible. Therefore we will not go and look for something today. Sometimes opportunities do come your way and then we as a senior leadership team would be not responsible not to look at it. Right now we're not running around looking at opportunities. If something comes 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. You can never say never. 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 to get distracted. We are single-mindedly focused on execution of our business plan, which is Project Genesis and our strategy. There are two ways of looking at acquisitions. One is tactical. Something comes 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, thank you. Another email 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?
Now, we obviously will not expand in our current area because I think we are well covered there. If we would like to increase our footprint, it will have to be geographically. There's also the note of the competition rules of a country. More than likely if we do want to expand, it will be outside our current territory.
Okay, understood. Thank you. We've got one more question in the queue which I'll ask in a minute. Just to remind everybody, there's very limited time for questions, so if you do have any final questions, please do put those in the Q& A tab at the bottom of the screen. The last question we have at the moment is this. With 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 2025 is easily in reach? In fact, it looks like you're well on track to meet the objective you set for year two, that is FY 2026, which was GBP 10 million adjusted PBT. How should we think about this?
I'll probably 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, and I rather like to be known as somebody who is conservative and careful before we promise something. The business has not delivered on the promises for the last two or three financial years, so the word 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. A bit.
We're more open in our own minds about how far we would like to stretch our promises, but now I like to keep it probably safe and to say that nothing is easy, and we will continue to work hard to exceed expectations. Rob, I don't know what.
Yeah, no, I mean all I'd add is that we do have a seasonal cycle within agriculture within Wynnstay' s financial year, and in terms of the phasing H1 to H2, we would expect a stronger H1. I just kind of come back to the fact that we've maintained market forecasts, so that gives confidence around the GBP 8.5 million, but clearly any upside, once we are aware and confident around that, we'd update the market accordingly.
Okay, that's great, and the final question we have is around the weighted average number of shares in issue, which has increased by, according to this questionnaire, around 4% per year over the last 15 years. I'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. As part of our capital allocation, we maintain the progressive dividend, but we've also focused on, as I call it, keeping our equity tight. For those who noticed in the RNS at the year end, we have now paused our dividend policy, so any dividends are now paid 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'll use to buy any shares off market to satisfy LTIPs. For the foreseeable future, we're focused on maintaining 23.1 million shares initially, and any benefits in PBT flowing to improve DPS.
That's all very clear, thank you very much. I'm afraid we've got no time for further questions at this point. 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 will open after the conclusion of the webinar. Your feedback is very useful to the management team. It's a great way to thank them for taking the time to present to you today. 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 email. 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 through difficult times, and we hope that this team will continue to prove that even us being conservative and careful before we predict anything is a team which is really focused on delivery and the execution of our business plan. We strongly believe in the plan. I'm grateful for the support of our investors and the confidence of our investors. I'm looking forward to talk to you all again in six months from now.
That's great.
Thank you both very much indeed. Thank you all for attending. This is the end of the webinar.