Good morning, thank you to everyone for joining us. With me this morning, I have Alan Boyd, Ridley CFO. Alan will be delivering his 12th and final set of Ridley annual financial results before he goes on retirement. Also joining me is Richard Betts, who joined Ridley at the start of this month and will assume the CFO responsibilities from tomorrow. The results presentation that we'll be taking you through today was loaded up on the ASX website this morning. I'm going to start with slide two, the FY 2021 highlights. I'm pleased to report that this is the strongest financial performance in over a decade for Ridley. Our first full year following the extensive business reset that took place in FY 2020.
Not only has the business demonstrated its resilience to the impacts of COVID and maintained its focus on safety, but it's also improved on all financial metrics. The EBITDA before significant items, which is our key performance measure, was AUD 69 million, which is up 16% on the prior year. Our focus on cash management has been rewarded with a 43% improvement in operating cash to AUD 82 million. This has allowed us to pay down AUD 64 million in debt with our leverage ratio at the 30th of June, down to 1.2x . With our balance sheet addressed and the favorable outlook for the business, the board has resumed the payment of dividends with the declaration of a AUD 0.02 per share final dividend. I'll now hand over to Alan Boyd, who will take you through the financial results in more detail.
Thank you, Quinton. We'll move to the profit and loss summary. From 1 July 2020, we've changed our segment reporting structure, and we now report two operating segments. We've split out into Bulk Stockfeeds and into Packaged Feeds and Ingredients. Each of those now has its own EBITDA result, which you can see there, and a particularly strong year for the Packaged Feeds and Ingredients business unit. Quinton will talk a little bit more about that in later slides. The combination of those two segments has delivered a operating result of AUD 79 million. Corporate costs are deducted from that value to get the AUD 69.1 million that you saw in the previous slide, corporate costs being consistent year-over-year. Last year, we had a bundle of individually significant items which we segregated from the operating result for clarity and transparency.
That figure has moved up by AUD 1.1 million as a result of a requirement to change our accounting policy for software as a service, which relates to the cloud computing change in interpretation of accounting standards during the year. That drops down to the AUD 69.1 consolidated EBITDA for 2021. Our depreciation and amortization has increased, as you can see, from AUD 26.2 to AUD 29.6, mostly as a result of the commencement of depreciation of the new Wellsford feed mill, which was officially opened 2020, in the first couple of months. Our consolidated EBIT of AUD 39.5 is AUD 50 million up from last year's AUD 11 million loss. The net finance cost reduction reflects the retirement of debt progressively during the year, plus a couple of small interest rate deductions.
Our income tax position last year was a benefit as a result of the individually significant items, and we've returned in FY 2021 to a normalized result of AUD 10.1 million. All of those numbers dropped down to a AUD 24.9 million NPAT for the year compared to the AUD 10.8 loss in the previous year. If we move across to the balance sheet, how that's reflected in the assets and the liabilities. Our cash has dropped a little bit, but the cash is just a function of the timing of repayments of debt and collections and receivables and payables at the time. The key item there, I think, is the inventory. We've had a AUD 23 million deduction since last year. Last year, we had some COVID contingency inventory levels that inflated the value to AUD 104.5.
Our target was to get back to the June 30, 2019 position of around five. We've beaten that target internally. That delivers a positive working capital adjustment for the period. Our receivables are pretty consistent from year-on-year. Our debtor days remain within that narrow banding, in accordance with our trading terms. We have a AUD 46.1 million item assets available for sale. That reflects the fact the Westbury site extrusion plant in Tasmania was sold prior to the year-end. Completion was affected on 2nd of August . It needs to be reflected as a current asset available for sale at June 30. Similarly, we've got our former mills at Bendigo, Murray Bridge, and Mooroopna are also classified in there for this AUD 46.1 million. Total current assets have increased from AUD 262 million to AUD 281 million accordingly.
Property, plant, and equipment has decreased from AUD 368 to AUD 320, largely as a result of that reclassification I've just spoken to. The key movement on the liability side of things is the reduction in gross debt. We were required to report borrowings as current last year. Reverted back to the normal non-capitalization. You can see there that there's AUD 70 million of gross debt that's retired. When you take the movement in cash balances, you get back to the AUD 64.1 million that was on the first slide there. Not many other movements really in the liability side. All of that translates to an increase in net assets to AUD 287.5. We've put together a slide of cash and net debt, where we generated an operating cash flow of AUD 82.4 million for the year, which is a cash conversion of 119%.
The table in the bottom left of this slide reflects that. We start with the EBITDA before significant items, AUD 69.1. The decrease in working capital over the period of 2021, that's largely a reflection of the movement in inventory. We always report maintenance capital, so stay in business, necessary capital above the line. We've taken that off to get down to the AUD 82.4 that I've just referred to in the top quadrant. Operating cash flow of 119%. The second graph on the slide in the middle there, inventory back to pre-COVID levels. It shows you for the FY 2020, the spike that we had, in getting above AUD 100 million of inventory, reflecting COVID contingency. We've gone back down to the historical levels and actually, as I said before, we've beaten our target of getting back to the FY 2019 level, and we hope to sustain that going forward.
All of that means on the right-hand side, the graph there, AUD 64.1 million net reduction in net debt. On the 2nd of August, as I said before, the sale of the extrusion plant at Westbury in Tasmania was completed, and the gross proceeds of that was AUD 54.85 million. There's a further reduction that you can see there from FY 2021, 30 June to the August 2021 position, where we're under AUD 40 million. With that, I'll hand back to Quinton.
Thanks, Alan. I'm going to take you through the segment performance, just to assist you in interpreting these results. If you can refer to page 8, this is the Bulk Stockfeeds slide. This segment delivered an EBITDA of AUD 32.5 million, reflecting a stronger second half. You'll recall that in the first half, Bulk Stockfeeds were AUD three and a half million behind the prior year, with the prior year being a record year with all the drought feeding that we did for the beef and sheep sectors. I'm pleased to say that in the second half, we've closed the gap to less than AUD 2 million on the year-on-year comparative. What's closed that gap has been our stronger sales in the pig and poultry sectors, where we're winning business and increasing the utilization of our mills.
As you know, in a business of this nature with high fixed costs, as you increase the volume, this is highly profitable. We also successfully consolidated the sales volumes from the Mooroopna mill into the new Wellsford mill, and we were able to close the Mooroopna feed mill in February, and the financial benefits of that have commenced since February. With the increasing volumes over lesser assets, our ROFE has adjusted upwards, as you can see, an increase of 5% to 25.7% for the year. Moving to the next slide. The Packaged and Ingredients segment delivered an EBITDA before significant items of AUD 46.5 million, which is up 32% on the prior year.
This was driven by a significant increase in the rendering returns, and we attribute this equally to two aspects, the sustainable yield improvements and product premiumization, which is an ongoing journey within the rendering business, and they are making good headway. Secondly, higher market pricing for rendered oils and meals. We also had a strong contribution from branded package sales in the traditional rural channels, and we're also now accessing the urban pet specialty stores and have a number of new product lines through that sector. As a result of that, the packaged products contributions were higher. In the aquafeed business unit, FY 2021 was a challenging year for us in so far as the competition in the market with the surplus production capacity. Notwithstanding that, we did grow our volumes, but that came at some expense on margins.
I'll be talking in subsequent slide to the impacts of the sale of Westbury in due course. Finally, included within this Packaged Feeds and Ingredients segment is the small loss made by Novacq in the FY 2021 year. This follows us moving to the commencement of commercial operations from Thailand on the 1st of July 2020, whereas in prior years, these costs have been capitalized. If we can move to the growth strategy, and I'll give you an update. That's page 11. This is the same slide that I've been presenting against for two years now. On the right-hand side, you can see the different initiatives. The color-coding explains the status of those various initiatives.
In the following three slides, I'm going to go through the initiatives that are going to be having an impact on FY 2022, and I'll just start with the top being the expansion and innovation, and then move through sales growth and then optimization. If I can ask you to join me on slide 12, the areas where we're going to have contributions in FY 2022, starting with the rendering product development. In the next two months, we'll be commissioning an AUD 4 million plant that produces land animal protein concentrates. These are valuable ingredients that are fish meal replacements, as well as highly sought after by the premium pet food market. This is a product that we have been producing and has got good uptake in the market, and now we're just increasing our production. That's going to be boosting returns within rendering during the coming year.
We've also, in our packaged products, launched four months ago, our new food for dogs range, which is in specialty stores. We're also taking our well-established Cobber brand, which is well-known in the rural sector, into rural grocery stores by the end of this year. Furthermore, we've been successful recently in winning a tender to supply the house brand of a leading national grocery retailer, and so this is a new market for us. Also, just to refer to Novacq, we continue to make progress on the production front, having tripled our production from the same operating footprint the year before. We're pleased with that, and obviously as you increase production, and the unit costs are coming down. We've also launched a new prawn diet for the current season, which has both performance and environmental benefits.
As a result of these advancements, we're budgeting to break even for the first time on Novacq in FY 2022. If we move to slide 13, which is the sales growth. Our monogastric growth initiatives are going from strength to strength, and we're increasing market share in both pig and poultry. As a result, we're looking to take the new Wellsford mill from a five day operation to a seven day operation from September. To give you some quantification of the extent of this growth, if we take the July monthly volume, which we just, last month's monthly volume, it's up 10% on the same period last year. July versus July is up 10% in pig and poultry volumes. On the aquafeed front, as advised previously, we've recently completed the commissioning of the upgrade of the Narangba aquafeed facility. That's our Queensland facility.
The business case for this upgrade was originally approved based on operational cost savings, but as an added benefit, it also gave us a 20% increase in capacity. With the recent sale of the Westbury facility in Tasmania, and Westbury, during FY 2021, was underutilized and loss-making. As a result of that, with the sale now, and consolidating all our production into the Narangba facility, we're forecasting an AUD 2 million EBITDA benefit in FY 2022, as well as an AUD 2.7 million reduction in depreciation. If we move to slide 14, which is the impact on FY 2022 earnings from the optimization initiatives. We are expecting that there will be some quick wins that'll contribute in the second half of FY 2022 from our supply chain review.
We expect that this will lead to improvements in our scheduling and our asset utilization and reduce some of the AUD 44 million that we spend on both freight and storage costs. All of this needs to be achieved while maintaining the DIFOT levels. We're also establishing an ingredient sales desk, which will be leveraging off our procurement strengths. The idea here is that we can supply direct to livestock producers who are currently mixing their own feed. These are not currently customers of Ridley, and this will give us access to new customers and also, it's a pretty low capital growth option. That's a new initiative that we'll be developing during the course of FY 2022. I'm now going to hand over to Richard Betts, our incoming CFO, to run through the capital allocation framework that's been established by the Ridley board.
Thanks, Richard.
Thank you, Quinton, and good morning all. Firstly, I'd just like to say how excited I am to be joining Ridley at such an important time in the company's history. As the results show, the underlying business is in very good shape, with excellent profits delivered in year and a strong balance sheet. On the back of that, it is important that the business has a disciplined capital framework that supports the underlying operating performance and our growth objectives. To that end, on page 15, we have outlined the capital framework that will underpin how we operate and how we prioritize reinvestment in our core business, whilst balancing the need to deliver strong returns to shareholders by way of dividends, funding our growth objective, and maintaining a strong balance sheet.
As you can see, the framework prioritizes reinvesting in the base business through setting up processes that ensure that appropriate levels of capital are reinvested and, more importantly, tracked annually. The model then recognizes the importance of having a strong balance sheet through maintaining debt levels that are appropriate for a business like Ridley, whilst allowing the business to make the correct decisions regarding delivering value for shareholders through a consistent dividend policy. While still providing the capital flexibility to deliver on our growth agenda based on prioritizing projects that align to strategy and deliver strong returns based on funds employed.
Pleasingly, in 2021, the business has delivered strongly against the capital allocation model, which has allowed the business to resume dividends with the announcement of an AUD 0.02 per share dividend in the second half, while still reducing net debt to 1.2x EBITDA, which is down from 2.6x last year. This was reduced even further in August with the sale of the Westbury plant, as Alan referred to earlier. The strong returns and the discipline in which the business has managed its balance sheet has resulted in a very pleasing total shareholder return in year of 57%. The framework is a critical element of how we will operate the business and therefore report our performance against the framework remains an important element for us going forward. I will now hand back to Quinton, who will talk about Project Boost.
Thanks, Richard. Leveraging off this new framework, the board has approved a AUD 15 million CapEx over and above our normal capital program, with the idea that we accelerate multiple small profit improvement projects across the business over the next 18 months. These projects are all within our core business, adding capacity, capability, and improving efficiency. When complete, the combined projects will add AUD 9 million to our earnings per annum. This provides a payback of less than three years, and we expect that whilst there will be some of the benefits in FY 2022, most of these earnings benefits will come online from FY 2023 after the capital projects are complete. If we move to slide 17, which is just to provide a summary for FY 2021. We see this as being a very successful year for Ridley, and the business continues to build momentum.
I wish to commend the employees of Ridley for the progress made in safety and the operational performance and the asset utilization that we're driving. As a business, we've generated strong cash flows and delivered EBITDA growth. Our EBITDA CAGR for the last two years has been 14%. We've addressed our balance sheet through disciplined capital management, and our key strategic initiatives are delivering. With this progress, the board has resumed shareholder dividends. All in all, a pleasing platform for us to launch into FY 2022. Which leads me to the outlook on slide 19. With the restructure that took place in FY 2020, we've established which drives accountability and operational efficiencies. To date, we have a much more customer-oriented business. This has led to sustainable improvements, and our underlying performance continues to gain in momentum.
Ridley is well-placed to grow earnings and cash in the year ahead, and this is likely to come from the continued momentum in our underlying business segments. By the way, in the first seven weeks of FY 2022, we've enjoyed a strong start to the year. The growth will also come from the ongoing delivery of the growth strategy, which I outlined earlier today, the main aspects that we'll be delivering in FY 2022, as well as the launch and expected returns from Project Boost. Then with the capital allocation framework that Richard outlined, we intend to deliver strong shareholder returns whilst maintaining a strong balance sheet and supporting the business growth. That's all that we were going to share with you upfront today, but would welcome the opportunity to hear your questions and to give you some more background on the performance of FY 2021.
If I can hand back to the moderator now to manage the questions. Thanks.
Thank you. If you wish to ask a question, please press star and one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star and two. If you're on a speakerphone, please pick up the handset to ask your question. Our first question comes from James Ferrier with Wilsons. Please go ahead.
Good morning, Quinton, Alan, Richard. Thanks for your time, and congratulations on the result. First question is in relation to slide 11, which is, as you said, Quinton, a familiar slide to us now. The optimization items that have been completed there, can you just confirm there's probably a couple of them, particularly the Northern Victorian Footprint Review, where the benefits won't have fully annualized in FY 2021, that there should still be some more benefits to come in FY 2022. Am I right in saying that?
Yes, James, you're right. That Northern Victorian footprint comprises of the closure of Bendigo, the 30th of June 2020, and then the closure of Mooroopna, in February 2021. The combination of those would've been in the order of AUD 7 million and AUD 8 million annualized. There's really only been four months of the second part of that benefit that's fallen into FY 2021 at this stage. There's still more of the annualized benefit to flow through in FY 2022.
Okay. If we were to assume another AUD 2 million, is that a reasonable starting point?
Yeah, that would be fair.
Yeah. Okay. Thank you. Second question's around the Packaged Feeds and Ingredients segment. On slide 13 there, you talk about the Aquafeed reset. Can you just confirm that financial benefit to flow from FY 2022 onwards? Is that a collective benefit of the Narangba expansion and the Westbury exit, or is it just the financial benefit of the latter?
It's just the financial benefit of the latter. What's transpired was that Westbury was underutilized, and we now have the ability to consolidate all that volume into Narangba. The operating costs of Westbury fall away. Whilst one would ordinarily think, well, you've now obviously got a transport impost of product from Brisbane down to the Tasmanian market, which was where the sales out of Westbury were predominantly going.
Yeah.
what happens is that all the product that the raw materials needed to be transported across the Bass Strait anyway. We're now just taking finished product across there. That's not that much of an impost. Also some of the New Zealand and mainland customers that were supplied out of Westbury, that product doesn't have to cross the Bass Strait twice in terms of raw materials into Tasmania and finished products coming back. Net-net out of all of that is an AUD 2 million EBITDA benefit.
Yeah. Okay. That makes sense. Thank you. Thirdly, slide nine, Quinton, you talked about the significant uplift in earnings from the Packaged Feeds and Ingredients segment, in particular, the benefits that were received out of the rendering assets there to do with market pricing.
Can you just add some more color on the current environment around market pricing, and how you're thinking about the prospects of normalization in that pricing environment, as it relates to the earnings for the year ahead?
Yeah, that's a very good question. If I can just repeat what's on the slide there just for clarity, the growth in the rendering performance we see as coming from two aspects. The sustainable yield and product premiumization journey that we're on. Those will be sustainable irrespective of market prices. The second half of that uplift, due to market prices, has been driven by global price increases across all proteins. That's both vegetable proteins and animal proteins. Soybean meal prices are at historical highs. That's a substitute for the animal proteins. Animal proteins supply is lower within Australia given that the beef sector is restocking, and so there's less cattle going through the abattoirs. Then on top of that, you've got the demand for oils as green fuel replacement, with policy in the U.S.
Tallow and all vegetable oils are at a higher pricing. How much of that is long-term structural change and how much is cyclical through supply and demand is very difficult. Our expectation is that the strong prices that we had in FY 2021 are prevailing today. In fact, they've lifted further in the last few months. It looks like we've got a pretty long, if not permanent structural change in the demand. There's definitely a longer cycle on this pricing.
Okay. That's very helpful color. Thanks, Quinton. I've got a couple of other questions, but I might just drop back in the queue and let others have a go for now. Thanks for your time.
Thanks, James.
Our next question comes from Paul Buys with Credit Suisse. Please go ahead.
Morning, guys. First one from me might just actually slight follow-up on James's previous question. I think you've made it pretty clear there, Quinton, but just to clarify then, so it sounds like notwithstanding the strong FY 2021 performance, given that price outlook and given you called out the yield improvements as sustainable, there's no reason why you wouldn't still be targeting growth in rendering, notwithstanding a stronger FY 2021 base. Is that fair?
That's correct. Yep. We do expect that the other initiatives that we've got within rendering will continue to grow the returns from rendering.
Some of those yield improvements were presumably realized throughout the period as well, so implying some kind of carry forward into FY 2022 as well, I'm guessing?
Yes. To provide a bit of context on that, we've been working very closely with our raw material suppliers to segregate product. What we're getting coming in is segregated product, which is then going through different processing plants at our rendering plant. Some of the capital that we've spent over the last few years means that, for example, instead of putting all our ovine sheep raw material going straight into a mixed product, we are now producing low ash ovine meal for the pet food sector. Those are the kind of initiatives that are sustainable going forward. There are a number of those that have kicked in during FY 2021 as well, which we'll get the full benefit of in FY 2022.
Got it. Thank you. I think you called out second half 2022 for the timeframe for some of those supply chain review benefits. I just wanted to get an idea if you can give us any color on your intention to reduce that AUD 44 million freight storage costs, just to get an idea of what kind of broad-brush materiality those benefits might be.
I think, obviously, we've set some stretch targets. We'd like to get the number above a 5% saving on that. We'll start pulling on those benefits in the second half of this year.
Okay. Thank you. Then the last one, just on the prawn feed business, I guess, just interested in your thoughts, I guess, on how your customers are playing out. Obviously, Tassal's continued to increase production. It looks like a couple of other operators might have kind of exited sort of stage left, which is good for Tassal, obviously, but just interested in, I guess, how you see that overall environment playing out for your prawn feed business.
There is a bit of a consolidation happening within the prawn sector, but I think overall positive. The COVID impacts have delayed some of the expansion plans with the prawn producers. We're the majority supplier to four of the suppliers outside of Tassal, and we are pretty closely aligned with them on their growth plans. We see this as an ongoing growth segment for us.
Great. Okay. Thank you. Thanks. That's all for me.
Thanks.
Our next question comes from [Brad Collin] with [Cranley Partners]. Please go ahead.
Good morning, James. Thanks for talking us through the presentation and certainly excellent result. The last caller actually sort of touched on the thing I wanted to ask about, but perhaps I can expand the question on aquafeed in terms of, would you be able to give us your perspective on how you see the demand and supply mechanics sort of playing out through this year, noting that you said some challenges, it's an oversupplied market, your production's increased threefold? Secondly, to that. Would you be able to tell us a little bit about how Thailand has been going through the last 12 months and what you may see as the next opportunities internationally for Novacq, including in Thailand?
Great. Thanks for those questions, Brad. If I could just, I'll deal with those in two separate sections. One dealing with aqua feed and our national position in aqua feed. Ridley's got a majority market position in the tropical species. Our strength has always been in the tropical, supplying those mostly north, in the northern part of Australia. Barramundi, prawn production, et cetera, where we've got the highest market share there. The salmon production is the area where we've got a smaller, or have had a smaller stake. If we look at the sector and following Ridley constructing the Westbury feed mill, BioMar have put on another feed mill in Tasmania to add to one that Skretting had already. Within a period of 12 months, we had two new feed mills with increased capacity.
The way we see the aqua market is, we continue to see strong growth in the sector. It has taken a little bit of a pause with the COVID impacts, but predominantly in the tropical species, we're expecting to see high single-digit or double-digit growth in those sectors. The feed supply will continue to be highly competitive given the surplus capacity that's on the ground. We're confident with our cost structure out of Queensland and our proximity to the northern customers, that we're well-placed to retain our strengths there. We've got well-experienced people in tropical and well-positioned to continue to participate in that growth. If I shift, Brad, to your second part of the question, which is Novacq, and I might just start with Novacq's role within our domestic aqua feed sales business.
The diets that we're offering are of producing prawn feed that has lower levels of protein, but still high performance. Those lower levels of protein mean that there is less nitrogen in discharge, which has got a significant environmental benefit for prawn producers. I think not only have we got technical expertise, but we've got the Novacq ingredient to provide meaningful gains in both productivity and environmental benefits. Swinging to Novacq production in Thailand, we've tripled that production in the last 12 months. We've increased the yield in the 14 ponds that we have there, and we are just commissioning now some of the drying equipment, which will help give us increased yields. Looking forward, we're looking to take some of our diets as early nursery production to supplying into the international market.
On the back of this new diet that we're selling to five different prawn producers in Australia this year, we'll be selling some of that internationally. It's always been a game of making sure that you've got the product and developing the markets at the same time. It hasn't been easy to visit prospective overseas customers during COVID, obviously, but there is significant interest still.
Thank you. That's a very comprehensive answer. I just, if it's okay, I might ask one very quick question just on the rendering business, which appears to be going very well if we think about where that's come from after the supply issues with the Ridley business closing down and impacting Maroota some time back. Given it is going so well, have you thought about, or looked at opportunities to move into other parts of Australia, for example, further up the coast into Queensland? Where you have abattoir concentration that would warrant a potential plant or any opportunities there to look at M&A?
Yeah. Brad, probably not going to be drawn into talking on M&A specifically in the public forum. Our position is that we're always looking at opportunities that present themselves. Yes, we do see rendering as a very attractive segment for us and it's got lots of complementary synergies within our business. Always looking for growth opportunities. At this stage, most of the benefits that we've delivered to date have been improving the performance of our existing rendering plants, but wouldn't rule out growth in the future.
Okay. Thanks, Quinton.
Thanks, James.
Our next question is a follow-up from James Ferrier with Wilsons. Please go ahead.
Thank you. Quinton, just on the Bulk Stockfeeds segment result. I think in the first half you talked a bit about some of the headwinds around raw material costs. I guess in some ways, what is a tailwind for rendering is maybe a bit of a headwind for the Bulk Stockfeeds business. To what extent did those headwinds ease in the second half result for Bulk Stockfeeds?
James, coming off the drought of FY 2020, the good rains we had, the good grain crop last year, the impact here meant that we were dropping from wheat prices in the 400s, dropped in the lead-up to the new crop which was December 2020, down to prices that fell below AUD 300 a ton. It's always difficult to navigate a swing from a tight market to what's going to be a surplus market, obviously the timing of harvest and all those kind of aspects that play through. There was a bit of wood sawing and that had some impact for us in the first half of FY 2021. Conditions have been more predictable and we've done a good job in managing raw material prices since then, such that we've had a much better contribution from that in the second half.
Today, prices are a bit firmer and notwithstanding a good crop that we expect on the eastern seaboard this year, global prices are a fair bit firmer, and so prices have increased. As you'd know, we're largely passed through those prices, but you just got to make sure that you navigate the ups and downs well. You're absolutely right, the first half did have some of that impact in it.
Great. Thank you. Question maybe for Alan, as a swan song, perhaps. Can you explain the ERP SaaS situation, just how much of what's been incurred in FY 2020 and FY 2021 is implementation versus ongoing cost, and what the impact is likely to be on the P&L into FY 2022 and beyond?
Yes, James. This was an interpretation by IFRIC, which is a body that sits in Europe, and in April they came out with a different interpretation of the accounting standard that says you actually don't own the asset if it's cloud-based. That put a spanner in the works for anybody that was implementing a cloud-based accounting system. We had to review our costs to date. What we've done historically is to put that as capitalized WIP in PP&E, and then when the project's finished and commissioned, it would flip out of there and into intangibles. We had to go back, look what the position was at 30th of June 2020. It incurred AUD 1.1 million of costs that would no longer be capitalizable under the new regime and do a backdated adjustment into the last year's accounts, restate those accounts.
It's incredible how many places it actually has a flow on impact, as you'll be able to see when the full reports come out. AUD 1.11 million going back into 2020. The costs, similarly, we did the same exercise for 2021, and we had AUD 3.6 million of costs that were pulled out of that capital WIP and put into operational cost in the result. We've reported in the 4E that the net result is that we've got no individually significant items for the year. That's a rounding of AUD 28,000 because coincidentally, offsetting that AUD 3.6 million on the new accounting standard is AUD 3.67 million of profit on sale of Lara and Moolap, which we reported in the first half year. The two of those balance out together.
It means that in the result, we've got AUD 3.6 million in the current year, AUD 1.1 million restated in FY 2020. Then there'll be a figure that will be again, reported as individually significant in the FY 2022 result, which will take the costs to commissioning of the new ERP system sometime towards the end of the first half of this year. That figure is likely to be AUD 600,000 or AUD 700,000. We'll report it down below the line for consistency. All that will be expensed and there will be a benefit flowing through to D&A in the future in that AUD five-point something million of costs that would otherwise be on the balance sheet and amortized over 10 years will not be there.
There won't be a D&A associated with it. And of course, it has a nice complicated tax implication as well, where you get nothing in the first 12 months, and then you get it spread over a four year period commencing in the following year. The FY 2021 has got a nice deferred tax asset attributed to the AUD 4.7 million cumulative expense.
Yeah. Okay. That makes sense.
I'm glad that makes sense to you, James.
No, sorry.
An absolute pain, but.
Your answer makes sense. The standard makes no sense at all. Am I right in saying that the ongoing cost of that SaaS provider, that's in the P&L? What you're referring to here is just the implementation costs?
The way to think of it is that what would otherwise have been capitalized is now going through the expense. Annually, with the cost of maintaining the license and all the other operational bits would ordinarily go through that. This is essentially the project to get it in that would otherwise have gone to the balance sheet.
Yeah. Okay. That's helpful. Just a couple of final ones. What was the outstanding on the securitized payables facility at year-end?
AUD 50. She got it down to within a couple of dollars.
The D&A number, obviously there's a few moving parts here with the SaaS stuff and also with Westbury, but could you give us a bit of an idea about where you think D&A will be for the year ahead?
Well, essentially the increase from FY 2020 to FY 2021 was Wellsford coming in, and the decrease that we can expect for next year is probably a similar number going out for 11 months for Westbury. It'll be, all things being equal, prima facie, about an AUD two and a half million drop, given that we've got a month's depreciation up until the second of August.
Yeah. Okay. That makes sense. Alan, thanks very much for your time over the years. It's been great doing business.
A pleasure, James. Thanks for your support. I'll still see you in the roadshow anyway, next one.
Once again, if you wish to ask a question, please press star and one on your telephone and wait for your name to be announced.
Moderator, are there any other questions for us today?
Yeah. There is one from Simon Conn.
Yes. The next question is from Simon Conn with IML, please go ahead.
Thanks, guys. Yeah, just firstly, Alan, I think you've been a stalwart for this business and managed the balance sheet through what's been some pretty difficult times. I just wanted to say on behalf of all shareholders, congratulations on a great result and thanks for everything over the years. You'll be really missed.
Thanks, Simon. That's greatly appreciated.
Yeah, it must be very pleasing to see the balance sheet and the business in the position it is today, because it's been a lot of work, a lot of hard work, a long time coming. Congratulations.
Thank you.
I've just got a couple of questions. Firstly, there's been some press about Hazeldene being for sale. I just wanted your thoughts, Quinton, on how that has any impacts on the business and obviously, one of the other customers or another company you know has been mentioned as being a potential acquirer. Second question was just around package. I just want to understand what you think your competitive advantage is in that sector, and good to see you getting some traction on that, but just your view on that. Then thirdly, on slide 11, I know you didn't want to talk about acquisitions, but you did say, "Yet to commence." In blue it says, "Acquisitions," and then in the lower bit it says, "Optimization." The portfolio review, I think it's still, you're saying yet to commence, but clearly you've done a fair bit of work there.
Just sort of thoughts on what more you can do with the portfolio you've got.
Great. Thanks, Simon. The first question regarding the potential Hazeldene transaction. I think from Ridley's point of view, Hazeldene is a key customer of ours. The Wellsford and St Arnaud feed mills supply product to them. We do have long-term agreements in place and we believe we provide a top-quality product at a very competitive offering. We're not seeing any concerns regarding any sort of change in structure or ownership to the extent that there may be a transaction.
Our position's well, got a good foundation there. In regards to the package sector, what are our competitive advantages? Well, one thing is that in the rural sector, we're the only supplier of all species, so multiple species down to llama and rat diets, et cetera. We've got the full spectrum, and we are across the entire Eastern Seaboard. When you're talking about the wholesale chains that are in different states, we're one supplier that can deliver in all states as we produce product in the South and in the North, and in all species. I think that gives us a competitive advantage. The other aspects there would be procurement, both our scale and capability within procurement, buying the raws cost-effectively, as well as the supply of rendering products as well, which is integrated.
That's where I see we have competitive advantage and extending that from our rural footprint into the urban market, which is growing very strongly, particularly around pets. We're upskilling our capabilities and our product. We've got the higher nutritional specs and as a result of that, getting into the grocery chains, getting into the specialty pet chains. I think there's a fair bit of opportunity there for us. Your last question around the acquisitions and the portfolio review.
Yeah. Well, I was just wondering, you've got the AUD 46 million assets held for sale. Obviously, you've sold one. You've got three you've identified to further sell. Yeah. As in, what you're implying there's more to do?
Well, our key focus has been to get our balance sheet into shape.
We've achieved that now.
Now we do have a platform from which we can make targeted acquisitions and decisions. I think the whole objective of the capital allocation framework is to give you, as shareholders, the assurance that before we spent any money, there would be very rigorous assessment. It would need to be in line with our strategies and our capability and give us the ROIC hurdles that we need. We've got ourselves to a position now where we've got options on how we grow the business from here.
Yeah. A lot on that too. Okay. Thanks.
Great.
Thanks, Alan.
Great. Thanks, Simon. Thank you.
Thanks, Simon.
There are no further questions at this time. I'll now hand back to Quinton for closing remarks.
Great. Thanks very much, and thank you to everyone for joining us, and thank you particularly for those questions. I hope that you share with us our enthusiasm for the business. We're pleased with the FY 2021 result and have confidence in the momentum that's within the business, and looking forward to FY 2022. We'll be meeting with a number of you in a couple of weeks' time as we do the roadshow, and look forward to further questions from you. As this is Alan's last full year results, I just wanted to acknowledge his contribution to the business over the past 12 years, and as the sentiment's been echoed by many of you on the call today, his contribution and steady hand on the tiller has been very welcomed through Ridley through 12 years.
For me personally, a fantastic ability for me to transition into the business knowing Alan with his background and the secure way in which he's managed it all. I think Alan leaves the business in very good shape, and just want to acknowledge that significant contribution. Thanks, Alan.
Thank you, Quinton.
Thanks to everybody for joining, and we'll end the conference call now. Thanks very much.