Ladies and gentlemen, thank you for standing by, and welcome to Ingham's Group Limited First Half Results Conference Call. Today's call will include the question and answer session I must advise you that this conference is being recorded today. Thursday, 22nd February 2018. I'd now like to hand the conference over to your speaker host today, Mr. Mick McMahon, CEO of Income's Group.
Thank you, sir. Please go ahead.
Thank you for joining the, results call for the first half. With me today is Ian Brennan, our CFO and Janelle Cashion, our Chief Operating Officer. I'll run through the key points, this morning and Ian will cover the financials and, we'll make sure there's plenty of time, for questions. But in short, we're we're delivered some pleasing results. We're delivering on our strategy.
We're seeing growing volumes and earnings and very strong, cash flow. In particular in in Australia where we're cycling the BDLP initiatives from customers in FY17, we continue to see growth in, chicken and turkey. And overall for the business, we grew, core chicken and turkey volumes at 3.7 percent. So that's excluding ingredients. We are seeing rising energy, and feed costs and we're either offsetting them or being able to pass them through, to customers, where we can't offset them.
And we've seen price increases across all channels, and into customers that account for, the vast majority of our volume. I very pleased with New Zealand performance, driven by strong growth in poultry and recovery of dairy seed volumes in what's a challenging competitive market, but we are performing well over there. And, as I said, we generate very strong cash, supported by some targeted asset sales as we implement our strategy and that's seen us, reducing our leverage ratio down below 1. In terms of project accelerates. We're now, 3 or so years into that 5 year strategy.
It continues to deliver, in line with our expectations. We're seeing those benefits flow through in areas like improved yields, reducing costs and improving utilization of our assets right across the network. And, we're very pleased with how that is tracking. And we're also, turning our mine now to, to other areas of opportunity in, in, farming further processing feed, and so on. And we continue to maintain capital investment into the business to both expand capacity and improve our efficiency.
The South Australia hatchery and breeder investments are on the ground fully operational. The new feed mill in South Australia is progressing well to be commissioned, in the second half of the calendar year. We just opened our new Queensland distribution center and we've acquired an existing feed mill in Queensland to complement our existing capacity. So a lot going on in the business and a lot of investments are continuing to be made. Turning to the financial, highlights, overall poultry volumes, growing and excluding ingredients growing at 3.7% As I said, our revenue, as we said in this business, revenue is not a good indicator of activity because it's influenced by things like feed prices, and the lagged effect of of, of falling seed prices can and also in this particular half reduced third party feed volumes as we focus on profitability in that segment within Australia cycle the effect of one contract loss in Victoria, from a year or so ago.
But very strong financial performance off the back of that growth in poultry volumes, gross profit increasing 6.1 percent EBITDA, up 22% but stripping out the effect of asset sales and restructuring underlying EBITDA up 14.8% and net profit after tax increasing 28.1 and, that's put us, in a or contributed to a very strong cash position and, reducing our net debt significantly down and our leverage ratio below 1. Earnings per share at 17.7 and the board declaring an interim dividend of 9 point 0.5¢ per share. Just reconfirming though that across the full year, our dividend policy remains unchanged in intention to payout, in that 65 to 70% range. All of that taken together and the, the cash, that we've generated and sitting on the balance sheet puts us in a position where the board has seen fit to, consider the capital management options. We'll be taking some soundings from investors over the next few days on those options, and progressing them over the next few months.
Turning to Australia, where we saw most of that EDLP activity in the prior, period a year ago. We saw poultry volume excluding ingredients up 2.7% in Australia. We are seeing those price increases across all channels plays out differently in the different segments, can flow through very quickly into the wholesale channel, which is effectively a weekly spot. Market. And then depending on the various, contractual arrangements that we have in place with customers, it flows through.
In different ways through, to to our key customers. But as I said earlier, so where north of 60% of our volume has seen price increases over recent, weeks months. We are seeing the accelerate benefits come through and improving the profitability within Australia. And the we've we've also seen a return to growth in premium penetration of uh-uh products like free range as we get past the EDLP launches from last year, which if you like, drowned out a lot of the, the premium propositions. Wholesale market prices have have strengthened significantly, which reflects the fact that smaller competitors in particular see, increases in seed prices before we do.
And probably probably not procuring energy in the same way we are. So they're they're subject to those cost price pressures before we are and we tend to see it first in the wholesale market. And then as I said, within Australia, we're cycling a third party customer loss, from a year or so ago. Excuse me. And we're also seeing some lower demand from smaller chicken feed customers as those feed prices flow through Within New Zealand, it's a mix, if you like, a very strong, performance, from our business there in what we would describe a return to some of the challenging market conditions, across that half.
We are, to some extent, cycling a relatively soft performance from a year ago, in New Zealand, but also pleased with the progress that we've made both in growing, our poultry volumes. And supported by, recovery in dairy feed volumes as, as dairy demand has has increased in that market. A lot of, focus continues into the high value products like, free range, white tower, and in continuing to drive improved operational performance within that business in particular, very pleased with the working capital performance in our New Zealand business and, in fact, in Australia as well, but, in New Zealand, we run a very tight and disciplined business with inventory, well in control and and and a very fast cash conversion cycle. So a lot to be pleased for, with, you know, our New Zealand business despite some of the challenges in the marketplace there. So with that, I'll hand over to Ian to, run through
the financial results themselves. Thanks, Mick, and good morning. On page 8, you can see the profit and loss, the earnings performance has been pleasing for the first half. With EBITDA 22 percent ahead of the comparable period last year. This includes the profit on sale of the Wanuru property, of $14,100,000.
However, that's been offset by $6,800,000 of restructuring. But restructuring related to redundancies in both New South Wales and Victoria and also greater farm exit costs predominantly in New South Wales. A reconciliation of this underlying EBITDA, which excludes both of those items can be seen and detailed on page 9. The gross profit of the business continues to improve and this reflects the benefits that we have driven by the Accelerate program with efficiencies and cost reduction If you look at the net profit after tax, that grew 28% versus the corresponding period last year And this included a one off tax credit at $3,100,000 and that follows a settlement of an historical dispute that originated whilst in family ownership. Page 9, as I mentioned, shows the reconciliation of the underlying EBITDA to the statutory EBITDA I referred to earlier and also highlights the underlying group EBITDA and Australia EBITDA margins.
If I move to page 10 on cash flow and balance sheet, We've had a very strong cash period as Mick mentioned earlier and this has driven net debt to $193,300,000. Tight working capital management contributed approximately $27,000,000 in the period and the business had an overall operating cash conversion ratio to EBITDA of 110.5 percent great result. This, together with the proceeds from the Wannaroo property, and CapEx spend in line with our expectations drove the leverage ratio to below 1 at 0.9 times. And with that, I will hand back to Mick.
Thanks, Ian. So a quick update on our strategy, reminder that But our focus is on ensuring that Ian's is as good as anyone in the world, and a genuine world class food company. We believe we're making very good progress towards that, but the more we look at, some of the best in class operators in and other parts of the world, we can still see a lot of room for improvement in the business here. On project accelerated itself, our focus hasn't changed. We're now, somewhere around 3 years in to that 5 year strategy with the benefits flowing through, in line with expectations, some ups and some downs on the various initiatives, but overall on or slightly ahead, of where we expected to be.
And we're also, starting to focus in on some of those other opportunities, as I mentioned, areas like farming, feed and so on. On the initiatives themselves, we are seeing, automation, the capital investments that went into the plants, particularly in primary processing, delivering, those improved yields and labor, lower labor costs through our key primary processing plants. We're continuing to or continuing with that initiative into our New Zealand plant, and, and then through into some of our smaller plans FP, and the like. We also see a lot of opportunity still in in streamlining processes within our plant, debottlenecking our plants, and so on. We do a very good job, but, but, still run relatively complex plants compared to other parts of the world.
We're, pleased to say that we've completed all the major EBA renegotiations, and, locked in the flexibility and opportunities for improved labor productivity that we were looking for. We're now moving through to focus on some of the smaller EBA's areas like maintenance agreements and the like, but So you never quite finished that, but the the major DBA's are are locked down and delivering, we're delivering benefits against them. And we've had a lot of support from our, from our people, in general for that, for that process. In terms of network rationalization, following the closure of the plant in in New South Wales, some 18 months or so ago now, we continued to grow volumes into Queensland and South Australia, supported by the capital investment we've made in those markets in recent times. And, consequently reducing activity in New South Wales and a little bit of production, in Victoria.
Then, other initiatives in areas like procurement, Turkey, and supply chain, all all tracking as we expect And, as I said, the capital investment continues to flow into the business. Turning to energy and feed prices. We give you a little bit of color on that. We still see some, energy costs increases ahead of us. For instance, our gas prices, in the market at the moment, some 30% higher than than our current contractual arrangements.
Who knows what they'll be by the time we get to December 2018, but just as an indicator of where the market is now. Suddenly with electricity where we'll cover through to the middle of this year. We have procurement progressive procurement approach in place for FY 'nineteen. But in the end as a large energy user will be, impacted by, whatever happens in the energy markets through that time. I guess the only encouraging thing in that is that all industry participants face the same challenge, and we're seeing that evidenced in in flow through to market price increases in in recent times the last 3 or 4 months in particular.
We'll continue to focus on offsetting those increases. Of course, we're not really in the business of passing on, price increases unless we have to. But we are able to do that where we do have no option. And the the Ben benefit of a lot of the recent capital investment, if it it does come with a lower energy usage, particularly in, areas like DCs and a number of our farms, and the like. So, so, we should from a competitive point of view get get some benefit from that new investment as well.
These prices are up, in general, they can move up, they can move down, remembering that, with majority Australian wheat, it's been a dry summer and, and Australian wheat prices tend to be higher, particularly in Queensland, New South Wales, regions. But our forward coverage extends about roughly 9 months. We will start to see some of the seed price increase over the last 6 or 9 months flowing through over the next little while. But again, we're seeing market pricing move, to reflect that. We are seeing some of the smaller feed customers who don't have the balance sheet or or they've been not covered forward starting to, fuel the pressure as some of those rising, cost prices in, particularly on feed.
And within New Zealand, the feed process tend to be a little bit more stable because a fair bit of a feed is imported. But there are, some rising price pressures there, but not to the same extent, as in Australia. On feed itself and a a brief update on what we do with feed, the reminder that we're we're focusing on, self sufficiency. So provision of feed for our unused chicken and turkey and in in doing so improving meal utilization and making sure that third party sales are profitable where we engage in them. The South Australian seed mill well progressed, as I said, was acquired a smaller mill, existing mill at Waikol, Waikol in Queensland.
And that will take us to self sufficiency, in Queensland as well as South Australia and we're progressing, a new feed mill in WA as part of both WA expansion, taking Western Australia towards self sufficiency in chicken production and, ensuring that we can cover our own requirements over there. Both our dairy feed business in New Zealand And Mightivite, the whole seed business here in Australia, perform well. They operate to a different dynamic less influenced by increasing input prices. And we'll continue to work through a number of improvement opportunities within the commercial stock based business. So turning finally to outlook.
In summary, strategy implementation remains on track. We're we're pleased with, the momentum that we take into this half We will continue to face challenges of rising input costs, but we expect to be able to address them in the same way that we have over recent times. A reminder that last week last year was a 53 week year, and it changed the sort of, the end dates of the of the half. So The way as we revert to a 52 week year this year, the first half seasonality, which is more normal in the business will be a little more evident, compared to last year. We've talked about the New Zealand market, and we believe we're managing that market dynamic as well as we can.
But some challenges remain in that market. And, as I say, in terms third party feed customers, they they may struggle if feed prices continue to rise in terms of impact on, volume. There are some further asset sales, in the second half, and there may be, some further restructuring costs as we progress our strategy. But as we've said, our objective is to, is to have restructuring costs covered by asset sales or or or other initiatives, as we implement the strategy. Capital management options, I've talked about work through that over the next half and just confirming, that the dividend policy remains unchanged.
So with that, I'll stop there and we'll hand over
session. Your first question comes from the
Can I
just clarify the, I guess I'm interested in the performance on poultry volumes, the underlying, Performance X ingredient? How do you feel that was compared with market growth, particularly in Australia? Cause the 2.7% you had is a good result, but below where we're typically seeing industry growth on poultry in Australia.
Yes. So excluding ingredients, which I can fine if anyone wants me to, but we think that was a pretty good result. I would suspect it's either at or better than the market. And I I don't I can't demonstrate that but but I would judge that it's better than the market. And the reason for that is that they're we're cycling all those EDLP initiatives when a lot of capacity was both a lot of product was produced, and probably overproduced in response to a lot of those initiatives last year.
The volume still gets cleared through if you like because it ends up being cleared through wholesale channels or export channels. So we're seeing a tightening of supply through into wholesale channels, for instance. So so my judgment is that that's at least as good as the market as we cycle those initiatives and and probably a bit better.
Yeah. Okay. And then you talked about challenging market conditions in New Zealand. You've delivered 7% volume growth, 3% revenue growth, and 24% EBITDA growth, which bid is challenging?
It's a fair question. The the it's more of the dynamic and that, you know, competitors over there, probably long on production and and long on inventory. And so we're having to sort of navigate our way our way through that. So we think we're navigating our our way through that market dynamic reasonably well as evidenced by the numbers, but it's just a cautionary note.
Okay. Yeah, depreciation was up 25%. In the first half. Now the ad total property planning equipment was actually down slightly. What's the reason for such step up in depreciation?
Yes, it's the impact of the capital expenditure. If you look at last year, Craig, we a pretty hefty year where we've spent quite a bit. And although some of that was third party, we did we did a lot of P and E that went through into the into those capacity expansion. So that's the key driver.
But does that have a shorter average life or something that?
Yes. It's it's not typical 10 years. It can be anywhere from 5 to 7 years of some of that equipment.
Thank you. Your next question comes from the line of Paul Bai from Credit Suisse. Please go ahead.
Good morning guys. First one for me, just on just a quick one on the underlying EBITDA. You guys obviously showed the direct between kind of reported and underlying, but I just wondered at the segmental basis and reading through that reconciliation, is it fair to say that the difference between underlying, and reported would all sit in Australia, or is there some of that news, you know, is it a divisional split by underlying you've got it?
Yes, that's all it's all Australia.
Easy. Okay. Thank you. 2nd one, just think it was sort of midway through last year. You guys mentioned the expansion of your your WA operations.
I guess my so my question is how is that going? And more broadly, I suppose, opportunities in terms of expansion or increased penetration across customer basis, are there any opportunities out there, I guess, beyond sort of the market and the efficiency of the business?
Yes. So first of all, in terms of WA expense, at the main focus of that expansion is on, meeting our own local demand in WA. So at the moment, as an, as an indication, 50, 50, 60%, maybe a little bit more, of our own product is produced locally, and the rest comes in typically from South Australia. So as we build up our volumes in in South Australia, we can still support that, but to handle future growth, it's more efficient to do that out of, Western Australia. Effectively take the plan, for instance, from 1 shift to 2.
And, and focus that, that South Australian capacity back into the East Coast. So that's the that's the focus of our WA expansion in terms of what's actually happened with expanded broiler farms, which are on the ground and and, operating, we've invested some money in the plants and and we're able to expand the ship patent now off the back of our new EBA agreements are very efficiently. So so that's that's the focus there. In terms of the the wider market, look, there's always opportunities to, to grow. I would say probably the but you gotta be careful.
Of course, it's not growth in any cost, and it's, in this sort of a market, you wanna make sure that you're only growing where it's profitable. I would say the the opportunity, over the next little while might be more as some as the pressure comes on some smaller competitors, that that is and and and will create opportunities for us.
Okay. Thanks Nick. That's good segue into my next question, which is just going to be on the state of the Australian competitive environment. You've obviously touched on New Zealand. We've got some insight into listed players there.
But in terms of in terms of Australia and given a number of parts including energy and feed and I guess yourself improving your efficiency. My question was how do you see that playing out? And you've maybe partially kind of hinted at that. But I mean, do you think some of the smaller players close down or what kind of was, you know, just pressure leading to your winning business time? What do you see that landscape evolving?
Yeah. Well, it's,
I guess, there's, two things that hopefully can hear me, a bit of background noise. Yes. If you look at ourselves and our major competitor in this market, essentially following the same strategy at a logical level you like. We're we're both building up volume in in key plans independent of state borders if you like. So we can leverage or scale, putting investment, in capability, behind that.
That's that coupled with, you know, the cycle we're in with rising input costs. We'll put the pressure on smaller plans because we don't wish them any ill will and the number of them, are, by feed from us, for instance. But, yeah, it'll it'll only get harder for for some of those smaller clients. I I I would expect some of them do a good job of differentiating or doing something, somewhat unique and and and others will feel the pressure, a little bit more. So I guess that's a polite way to say that I, there may not be as many of them around, in, in, in the future, you look at what's happened in other markets as this sort of dynamic, plays out.
We mainly focus on fresh chicken when we when we're talking there, we're probably seeing the further processed, area a little more competitive. We're other
players,
at least one other of the smaller players, building up their FP capability. And and that, you know, so for those who can broaden their offer, if you like, we'll we'll probably do better than those who can.
Thank you. And last one, just on the feed business, just interested to know if you're kind of growing focus on self sufficiency. Is that with an aim to sort of improve profitability or is it kind of more from a, I guess, a risk management and diet perspective? And I just want to know what's driving, I guess, that focus?
It is both. So we we retain the margin, but but I'd say the major reason is, that, nutrition is key, to performance of this business, but it heavily links into your genetics, the development in the genetic program and we we believe that we're, the leader in in nutrition and the IP associated with that and we we have no desire that away to 3rd parties inadvertently, if you like, through 3rd party feed arrangements. So that's that's our very strong preference. We keep that in house. We control quality of our own food, I would say it's the major focus, but it does improve profitability as well.
Thanks guys. That's all from me.
Thank you. Next question comes from the line of Ari Narosi from UBS.
You please give an invitation around what the tax is asking for those non profit on sales restructuring items?
Did you say we just struggle to hear this, sorry, did you say that tax on the profit on sale loans?
Yeah, just a tax implication on the one off items.
Yeah, I mean, it'll be a straight 30% corporate tax rate.
And then, okay. Cool. And then on the bulk of the assets to help balance sheet, obviously, come back quite a bit this half wondering what that means to some of the property sales moving forward, please?
Yes. So there's, in terms of significant assets, sales property sales. There's a further asset sale which we've talked about before Leppington, which we expect to happen this half or it's contracted to happen this half. And apart from that in terms of, sort of active plans. That's about the extent of any significant property sales.
There's always a few smaller things happening around edges, farms or whatever, but in terms of high value items, that's the only one in the pipeline at the moment.
And then just on the contract lots as well and your commercial book base business, can you just please add a bit of color around the magnitude of the the rates a lot? And just in general, so that is where you see the future? Yes.
So that was in Victoria. We we had announced it, if you like, we communicated it at the time. I'll say a year ago that's somewhere there. So that was, I probably shouldn't talk specific customers, but but if, some of you will be aware that Ridley either build a new mill or expanded their mill significantly, in Geelong, which gave gave them a geographical advantage, from where our seed mill is in Victoria to this particular customer. So sort of a logical thing, if you like, In terms of that that mill, it just reduces the utilization of that, Victorian mill, which has already happened, you know, I say, pretty much a year ago.
So those things will happen in the 3rd party feed in terms of our focus. As I said, we're we're working through that. We spent the 1st 2 or 3 years very much focused on on the core chicken business for obvious reasons. That's where the biggest improvement is, and we're focusing in a little more on the, on the on the feed business, but despite there'll be wins and there'll be losses in that market. That's the nature of it.
There are opportunities to grow the commercial side of that business.
And just final one for me, please. On the price pressures you flagged, obviously offset the cost pressures Can you just give some color around the max speed of the increases and any confidence passing those 3? Obviously, you've got a large portion of your volume for the contracted logistics here. Over.
Yes. So we're very confident because they've been passed through, on in excess of 60 of our volume in Australia, for instance. In terms of magnitude, it can be up to, in the sort of 2% to 3% range. But, it varies depending on the product and the mix. And so a bit hard to be more specific than that.
I would say in the wholesale channel price, probably move more than that. And, and then it plays out slightly differently across the various channels. As I said, we're not really, we're not sitting out increase prices for the sake of it, but but we are able to do it. Thank you.
Thank you. Your next question comes from the line of John Pertell from Macquarie. Please ask your question.
Good morning, guys. How are you?
Good morning, John. Good. Hey, John.
Just had a few questions. Just the first one, just following on from the price increases there to recover feed. We didn't see that flow through. Was that is that a timing issue? So we should to see that in the second half in terms of a sort of high revenue number?
Well, definitely a timing issue. I don't have a second half revenue number in my head because I don't focus on revenue for the obvious reason. But yes, the majority of the price increases have flowed apart from the wholesale channel has flowed through in the last 2 to 3 months, 2 months. Yeah. And a number of them even in January.
Just in terms of electricity and gas, electricity, sort of you last mentioned back in August was you had a sort of contract borrowing pretty much now or at the end of end of, the first half. Has that been pushed out 6 months, Mick?
No. We're we're pretty much, through into, you know, progressive procurement on on electricity. And so we're absorbing some of those price increases now. And, as we said, gas, we got a bit longer to run. I think there's different tranches, though.
So we've currently it's under procurement, lock through to Yeah.
Luxury. So then we we lock through to the end of the financial year.
Yeah. So the
previous one expired and we're now into it. Yeah.
Okay. And and how should we think of the, the gap impacts versus electricity? I mean, previously you talked to a 20 mil gross impact on electricity and you expect to recover at least half of that?
Yeah. So we we use more electricity than gas. Yeah. Gas, it might be 25% order of magnitude of that of that impact.
So a fair bit lower than electricity?
Yes.
Yeah. Okay. Just a just
a couple of others if I can. Ian, just as far as working capital, performance there. And typically we see about the sort of, a first half build, we haven't seen that. So just in terms of some further color as far as what drove it,
Yeah. I mean, obviously, we we enabled the inventory financing, which is effectively now an ongoing payable. So we did have a little bit of benefit through that. Receivables came down to be fair. And that's not because we did too much differently.
So, you know, the overdue is reduced, which was good. But effectively, you know, like all half years and full years, it's timing of cash receipts. Inventory, we certainly have managed very tightly. That's one of the things where the inventory does is a constant weekly focus and that's been low. So from an accountant standpoint that's pleasing, from a planning customer service, it can be challenging, but overall, it's pretty good.
And then payables really is as a result of the, the Accelerate programs, that we've mentioned before, John, where you know, we renegotiated various terms and benefited through that. And that kind of is an ongoing performance driver. We think still a little bit more in payables as we go through. But it's a weekly management very tightly managed.
You. And just last question, just in terms of seasonality, can you provide any guide as far as what that looks like in a normal year in terms of revenue or otherwise?
I'm still waiting for a normal year in chicken. That's what that looks like. Or a normal week. So now look, we're just flagging that we'd be a bit cautious about taking the first half and times in 2 or something. And because last year, there were 2 impacts that affected the splits.
1 was, where the period end dates fell because 53 week. And in particular, that, kind of shortened the first half. If I can put it that way and put the extra week and and finish date into the second half. Plus we had a lot of accelerate benefits flowing through in the second half last year, particularly around the the card of closure So there are the 2 main factors. Apart from that, the genuine seasonality in the business is that We see a buildup in the run into Christmas and through summer and the barbecue birds introduce more seasonality into the business, especially that leader.
The 6 or 8 weeks leading into Christmas. So, those two things mean we see a bit more weight in the in the the first half in terms of, the front end of the business sales.
Your next question comes from the line of Michael Pete from Goldman Sachs. Please go ahead.
Morning, Anne, Mick and Janelle. I'm just on the Project Accelerate. Where do you think you are on a scale of 1 to 10 through the first sort of cost out phase?
Well, maybe put it slightly differently, but but I we we talked about a $160,000,000 of benefit being the first, the first target, if you like. Which we will progress through. And although it's a 5 year program, the vast majority of that comes in the in the 1st 4 years. So as we get to the end of FY 18, we'll be getting on for, you know, 140 odd or something of that 160, in the numbers, if that makes sense. So that gives you an indication, I think.
Okay. And it's the margin, I guess, potentially in Australia that you think you can achieve notwithstanding, I guess pass throughs might throw that out in terms of EBITDA margin, but is that double digit sort of margin?
Yes, I'm always cautious to put a target on that because then then people just work back from that in their spreadsheet. But but it you know, it's our ambition we've said repeatedly that a business like this be able to produce double digit EBITDA margin. We do it New Zealand, other, other good quality operators do it. So it's certainly our ambition. Yes.
And just on the capital management side, I mean, what's your upper leverage ratio sort of upper range that you would go to if you're considering capital management?
Yeah, the I probably won't answer that because it be a matter for the board over the next few months. We'll we'll take some soundings from investors and get some independent advice over the next few months, but I suppose, at one level, it's always pays to be cautious in terms of leverage ratios on the other business is a very good cash business. So I'm not sure we'd be too worried about the leverage ratio, but probably the easiest thing know, there's plenty of cash sitting there.
Yep. Finally, just on CapEx, and 21,200,000 in the half? I mean, what are we looking for for the year? Is it
a little bit lower? I thought it
might have been, but for the full year and maybe next year roughly?
Well, it's actually 30. So that's net of the 3rd party capital recovered, Michael. So we've said we expect it around about the 60, 65 and I kind of reiterate that's what we're thinking.
Yeah. No, that looks like spot on. Cheers. Thanks very much. Cheers.
Thank you. Next question comes from the line of Monique Rooney from Morgan Stanley. Please go ahead.
Oh, hi, Mick. Hi, Ann.
I've got
I've put a question on Project Accelerate. You guys have obviously done a phenomenal job on the cost side of things I know at the beginning, I guess, when we're doing the IPO process, you're talking about reinvesting a lot of those back into the business now that you're kind of 3 free through the project. Can you talk about the reinvestment rate? Is that kind of, higher or lower than what you'd expected?
Look, I would say it's it's running broadly speaking in line. Remember, that our competitors don't stand still, for the reasons we said earlier, certainly our bigger competitors, I can pursue some of the same sort of efficiencies that tends to find a twin to the market, which puts pressure on the smaller puts the pressure on the smaller player. So I think I did my best to avoid answering that question. There might be a process anyway, but I think majority of the analysts have probably got it about about right, but, we we, you know, some of it does get back to customers or in competition in the marketplace. But as we're demonstrating, we can, we can get some of it through to the bottom line as well.
Okay. Great. Thanks. And maybe just quickly, I mean, once you kind of get through Project Accelerate, how should we think about the kind of typical growth of of this business beyond that period?
Yeah. In terms of growth, I suppose what we've done so far is focus more on extracting value from the volume. The growth that we've got, particularly the growth we experienced through the course of last year, where we said that rapid growth in this business can be as challenging as no growth. So, so we're we're we're absorbed that and and looking to extract the operational leverage benefit if you like, from that growth. As we move forward, we talk about, you know, differentiation opportunities and, we put our toe in the water small amount in terms of differentiated high end exports out of New Zealand up into Hong Kong.
So there are opportunities to to to differentiate more. We're we're encouraged by return to growth in free range and so on as we got through the EDLP, at drowning out effects for 1 of a better term. So, in terms of top line differentiation, I I'd say we've, you know, we've done a a serviceable job, but as we get to focus more in on that, I believe there's more opportunities there. And in terms of continuing to extract, operational benefits and improve profitability, the longer you're in this business, the more opportunity you see. Do a very good job, I think, in terms of Australian, New Zealand, but we've put a bit of time and effort over the last 6, 12 months into sending people to visit plants in particularly in Europe which looks like a better better market for us to follow their stuff to many of the same consumer trends and many of the same sort of labor cost structures and so on as we are.
And, you come away very much believing that there's a lot of operational improvements still in our business. If you compare what we do here to the rest of the world, we do an awful lot in our primary plants, small birds, big birds, value enhanced all within the one plant. And, we do a tremendous job to to deliver that every day to our customers. But there there there are a lot better ways to do it when you look at what others do. So so we we're not sure of an improvement opportunity within the business.
Okay, great. Thanks. And maybe one last one from me, maybe a bit cheeky, but that's the full year FY17 results. Said you kind of were on, you were happy with consensus of about 2, 13,000,000 EBITDA. You're happy to reiterate that?
I'm never happy with anything to do with that, but yeah, yes. In terms of we're not advocating any change. We don't we don't provide guidance. But going to my earlier comments about seasonality, you know, I'd be I'd be I'd be cautious about lifting that too much.
Thank you. Next is a follow-up question from the line of Craig Woolford from Citigroup.
Hi, Vic. Hi. And just a quick one on this, working capital. So is there any seasonality working capital, particularly interested in payables, which was up a lot, will there be any reversal of that in the second half?
No. Not at all. It's, I mean, the issue with this business and last year was particularly kind of challenging because of the 53 weeks. Was where the half year month end finishes, Craig. So, yeah, this year was great.
It finished pretty much the 30th December. It's more normal. So I would expect, you should expect what you've seen in the first half through into the and that's to be fair.
There are no further questions at this time. Presenters, please continue.
All right. Well, we'll just finish there. So, thank you again. And, if you have any questions, let us know. Thanks very much.
Thank you.
Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.