Welcome to the KAL Group Financial Results presentation for the six months ending March 2025. This is a pre-recorded webcast presented by myself and Graeme. We will be available at the end for a live Q&A session. If we are unable to handle a particular matter, we will get back to you personally. You may start sending in questions as soon as you are ready. The agenda is on the screen, and the presentation will cover key points of interest for shareholders in terms of strategy and structure, key operational trends and indicators, investor information, our financial performance, segmental reviews, financial position, and the outlook to the extent possible. Although we have shared this strategy detail at prior shareholder engagements, we thought it relevant to emphasize a few points.
Firstly, on the right-hand side of the slide, the strategic outcomes of the growth strategy from F26 to F30 are circa ZAR 660 million-ZAR 700 million PBT growth. During and at the end of the period, we would like to achieve a ROIC of 14% and maintain debt to equity around the 40% level, depending on the timing of investments. This will happen in three segments being Agrimark, PEG, and the new business segment. Secondly, at the bottom of the slide, the action plans on how we achieve the stated growth targets are indicated and are a balance of operational efficiency, market share, Agrimark and convenience center footprint growth, and strategically selected investments for the future.
Although the shareholdings in our group subsidiaries have not changed since our previous presentation, we would like to highlight the name change of TFC to PEG Retail Operations, as well as the rebranding of the business-to-business facing brand of the subsidiary. Note that the convenience centers that PEG operates are branded in the customer-facing brands of Engen in the case of fuel or Wimpy and KFC in the case of food convenience, for example. The PEG brand, a management service company, is well known in the fuel sector to suppliers, to banks, to QSR franchisors, and other stakeholders as the leading independent retail fuel site and franchisee operator in South Africa. The PEG BE ownership status remains above 50% on a direct black ownership basis.
As stated before, it is important for all investors running valuation models to keep in mind that the KAL Group shareholding of 58.2% or 61.4%, including ETI, in PEG when modeling attributable earnings to shareholders of the holding company. On this slide, we have a geographical heat map of all 270 group business units on the left-hand side, of which 80 are within the PEG business segment, having sold nine sites to Agrimark during the period to achieve management and administrative efficiencies. On the right-hand graph, we have the business unit movement as at the end of each financial reporting period, and during the period, footprint expansion was limited to only one Agrimark in KZN, and as such, the focus was still very much on reducing debt levels and waiting for an uptick in certain elements of the business and economy.
The group operates 151 retail fuel license sites in South Africa and Namibia, of which PEG operates 76 in South Africa. PEG operates 319 retail touchpoints at our convenience center sites, where we are earning the majority of gross profits from convenience retail versus fuel. Our footprint emphasizes a diverse customer base, mitigating single-sector exposure, and ensures strong cash generation out of our retail convenience center network. There has been quite a bit going on in the first half, so let's go through some of the key operational trends for the half year. The key matters being the Easter holiday swing from March to April, mainly impacting the fuel and convenience retail.
Having said that, Agri input channel and overall retail channel showed growth, especially when looking at the graph, the bottom right-hand side, and comparing the first half Agri and retail trading profit growth versus the prior year to the trend in quarter four of last year, where one can clearly see the upward momentum. More on this later. The company is in a very healthy position with CAPEX equatable to ZAR 76 million. Our like-for-like interest-bearing debt was down ZAR 244 million, debt to equity down to 48%, stock levels reduced, the debtors book in a healthy position, as well as OPEX growth being curtailed to only 1.9%.
This has motivated us to improve the interim dividend, and other key trends were our DC throughput growth slowing in alignment to the retail growth slowing, while fuel volumes were down 2.6% off the back of Easter swing, but also due to the lower load-shedding demand, which annualized in March, as well as N3 highway issues continuing to impact volumes. The overall GP has only grown by 1.5% when excluding fuel price changes impact. The red tape holding us back on footprint expansions in PEG division is being addressed. Our wheat intake volumes were lower than prior year, while collectively the building material categories were down 2.1%. So to summarize, although there are still some drags on the business, there is a lot to be positive about. I'll hand over to Graeme.
Thanks, Sean. Despite some of the key indicators showing slightly negative year-on-year movements, as you'll see later in the presentation, there's a clear and definite upward trend in performance compared to the back end of our 2024 financial year. Taking into account that fuel revenue contributes 57% to total revenue and that both fuel revenue being price regulated and grain revenue being SAFEX hedged are not drivers or indicators of profitability, it's more appropriate to consider gross profit margins and fuel volumes when assessing performance. Increases or decreases in fuel or grain prices do not translate into improved or reduced gross profit, apart from one-off stock price adjustments in the case of fuel. It is, however, important to highlight that during the period, both retail and Agri input channel revenue increased. The year-on-year impact of reduced fuel price change gains negatively impacted gross profit by ZAR 10.4 million.
Gross profit grew 0.9% or 1.5% when excluding the impact of year-on-year fuel price change gains, with the increased contribution of high-margin convenience and QSR revenue, ongoing retail margin management initiatives, and continued growth in distribution center throughput supporting retail trading margin growth. Agri input channel margins were slightly lower on the back of strong Agri revenue growth. EBITDA reduced by 2.1% to ZAR 557.1 million. Recurring headline earnings reduced by 4.3% or 2.1% lower when excluding the impact of year-on-year fuel price change gains. Recurring headline earnings per share reduced by 3.7% to ZAR 3.9365 or 2% lower excluding fuel price change gains. Fuel liter volume decreases were experienced across the entire South African fuel industry, with liters down 3.2% in PEG and 1.2% in Agrimark. PEG fuel volumes were significantly impacted during H1 by Easter travel volumes falling in April this year compared to March last year.
Return on invested capital calculated excluding the impact of IFRS 16 reduced from 8.2% last year to 7.6% this year. Just note that this ROIC is not annualized. Despite recurring headline earnings being slightly lower year-on-year, the group balance sheet has continued to strengthen with significant gearing improvements. This, together with the ongoing robust performance, supports the board's approval of a 3.7% increase in the interim dividend to ZAR 0.56 per share. Our gearing improvement continues to be a standout performance during challenging trading conditions. The group's debt to EBITDA ratio decreased to 48.4% from 56.5% last year, with interim net debt to EBITDA constant at 3.3x and interest cover of 4.9 compared to 5.1 x last year. The gearing reduction is expected to slow, however, during H2 due to the onboarding of new PEG fuel sites. This slide highlights some key investor information.
Current shareholding reflects a 93% free float, with KAL directors increasing their shareholding to 2% during the period. Our top 20 fund manager shareholders account for just over 45% of issued shares. The KAL share price saw strong growth during the past 12 months, reaching a high of just over ZAR 53 per share. Unfortunately, the KAL share has not been immune to market dynamics and has returned to a level around ZAR 40, below NAV and following a very similar trend to the retailers' index, 16.8% of shares traded during the last 12 months. Our consistent dividend policy remains, taking into account debt repayment priorities, with our interim dividend increasing by 3.7%. Dividend payments remain strong, and we are on track to improve our dividend payout ratio. As mentioned on the previous slide, our gearing improvement continues in line with commitments.
Our credit offering remains a sales enabler, and the performance of the book has been exceptional. The book remains healthy, and debtors' balance is not within terms of decreased. In line with our F30 strategy, we continue to explore various complementary value-enhancing M&A opportunities. At our AGM in February, we elaborated on our F30 strategy to achieve ZAR 1.5 billion PBT by 2030. We have set clear business segment targets based on operational efficiency improvements and market share and footprint growth, with clear return and gearing thresholds. Looking at the income statement, gross profit grew by 0.9%, and gross profit margins improved year-on-year. Effective cost management remains a key focus area. The business again demonstrated its ability to flex and contain costs during tough trading times, with operating expenses growing by only 1.9%.
Although EBITDA reduced by 2.1% to ZAR 557.1 million, EBITDA growth over the past four years has been impressive, with this six-month EBITDA exceeding 2021's full-year EBITDA value. Recurring headline earnings decreased by 4.3% and RHEPS decreased by 3.7%. Return on equity, being only six months' return on full equity, was down to 8.9%. An interim dividend of ZAR 0.56 per share has been declared, up from ZAR 0.54 per share last year. The three graphs at the bottom illustrate the sustained strong five-year performance of the business. Moving on to the balance sheet, year-on-year non-current assets grew off the back of capital expenditure and right-of-use asset lease modifications in terms of IFRS 16, while current assets decreased due to lower cash on hand balances, lower inventory levels, and assets held for sale last year.
The group's commitment to reducing gearing levels continued, with ZAR 201.9 million in term debt being settled during the 12 months, contributing to improvements in our debt to equity ratio. On a like-for-like basis, group interest-bearing debt decreased by ZAR 243.5 million. In summary, our balance sheet remains strong, ensuring sustainability, allowing for growth with effective capital allocation supporting our focus on return on invested capital and our debt repayment continuing. This slide reflects the recurring headline earnings movement, comparing half year 2024 to half year 2025. As mentioned, gross profit grew by 0.9%, and GP margins widened. Expense management was excellent, with expenses growing by only 1.9%. Interest received decreased off the back of lower average debtors' balances due to slower credit sales. Interest paid to banks decreased due to the year-on-year reduction in net interest-bearing debt resulting from the scheduled term debt repayments being met.
The minor recurring headline earnings adjustments referred to one-off costs associated with new business development. In total, recurring headline earnings reduced by 4.3% or 2.1% when excluding the impact of lower year-on-year fuel price change gains. This slide illustrates the elements that take us from gross profit to recurring headline earnings. Gross profit grew by 0.9%, generating ZAR 1.66 billion. While operating expenses grew by a low 1.9% due to low GP growth, the OPEX to GP ratio increased by 0.7%- 73.8%. Lower interest received further contributed to the operating profit to GP ratio decreasing by 1.6% - 33.2%. The group generated ZAR 310.7 million in RHE for the six months, with recurring headline earnings to GP ratio 1% lower at 18.7%. Due to the minority shareholdings in PEG, 89.4% of group recurring headline earnings is attributable to shareholders of KAL.
We consider recurring headline earnings per share to be a strong indicator of sustained wealth creation, as it eliminates the impact of one-off events. As such, this slide illustrates the items impacting earnings to calculate headline earnings per share and recurring headline earnings per share. Headline earnings adjustment in the current and prior year relate to the profit on disposal of minor assets. Non-recurring adjustments in the current year relate to costs associated with new business development. There were no non-recurring items during H1 last year. Recurring headline earnings per share decreased by 3.7% per year. However, from half year 2020 to half year 2025, recurring headline earnings grew by a compound 11.9%, and recurring headline earnings per share grew by a compound 9.7%.
As we have previously stated, return on invested capital and EVA are key performance indicators in the business and form the basis of effective capital allocation process and investment decisions. Throughout the periods in the graph, ROIC has consistently outperformed WACC, creating economic value add for shareholders. During 2022, we completed two significant ROIC enhancing initiatives. Firstly, we disposed of TFC properties, and secondly, we concluded the acquisition of the PEG Group, adding 41 highly cash-generative retail fuel and convenience service stations to the group. The disappointing second half of 2024 resulted in a reduction in ROIC, but still in excess of WACC. ROIC for the first six months of the current financial year is slightly behind last year. However, with a significantly improved H2 performance expected, together with prudent capital investment, strong working capital management, and ongoing debt reduction, full-year ROIC prospects are encouraging.
As a reminder, you'll notice in the remuneration report tabled at our recent AGM that executive reward in terms of the long-term share incentive scheme is linked to EVA as a performance hurdle, with management incentivized to outperform specific ROIC targets. I'll hand back to Sean for the segmental reviews.
The Agrimark business segment, although traditionally focused on the agri input requirements of farmers, farmer post-harvest packaging requirements, farmer spend on farm expansions, and general farm maintenance spend, has quite changed dramatically over time, with Agrimarks now boasting an A store format including 20,000 active SKUs, while B store formats carry approximately 8,000 SKUs. Other formats are tailored range specific to area and demand. Our retail in-store offerings have expanded to include garden, pet, pool, DIY, outdoor liquor, and other general retail assortments.
We have invested smartly in centralized supply chain capabilities like inventory management, warehousing, distribution, assortment planning, and optimization, price and margin management. This is now all being done centrally and digitally. Our distribution center plays a critical role in enabling the Agrimarks to focus on a customer-first experience. Due to this investment, we are now able to offer a vastly improved product range to the Agrimarks' diverse range of retail customers. The Agrimark business segment strategy is focused in order of rand value add on market share growth, mainly without bricks and mortar, what we call the vertical channel. Secondly, operational efficiencies, some footprint expansion, and selected farm fuel expansions in support of our Agrimark market share drive in water-intensive areas. In the table on the left, we have included the total value of transactions in the segment, which you can see grew 3.7%, of which direct transactions grew 6.3%.
Statutory revenue excludes the direct transactions. It is however important to monitor the movement of direct transactions, as our market share drive to grow with our top 200 and potential 200 customers comes with quite a large portion of direct transactions, seeing that we do not intend establishing bricks and mortar in all the areas we intend growing. Furthermore, whereas the agri input channel revenue in the table only indicates a 3% growth for the period, what we need to highlight is that our market share gains via our virtual channel are growing at a fast pace. To reiterate, we indicate what revenue is included in agri inputs on the bottom left below the table. Those categories are fertilizers, chemicals, farm infrastructure, packaging materials, horticulture, and mechanization and last irrigation, but exclude fuel.
When analyzing the ZAR 2 billion agri inputs and the ZAR 1.5 billion agri inputs that are done directly, we can report that agri input sales in total are growing by 12.2%. This all speaks to our market share gains being more successful than depicted in the statutory numbers in the table. These gains of direct sales do however come at low margins given the virtual nature of the sale. Clearly, what's holding back profit growth is not this, but rather the sluggish stock sales growth from our bricks and mortar stores. Looking at the total agri input performance, in which we include the value of direct sales in the commentary on the right-hand side, to give the real growth picture, farm infrastructure, horticulture, and fertilizer are showing double-digit growth, this off the back of professional services being offered to farmers on 10 key farm infrastructure projects, which is boosting sales.
The market share gains in fertilizer and horticulture via the non-bricks and mortar channel I have already referred to. Packaging material has shown growth off the back of a better table grape and stone fruit season, but the value has negatively been impacted by deflation on punnets and a changing sales mix. On the negative side, New Zealand agency whole goods sales were under pressure, as well as irrigation sales out of our Agrimark stores. In terms of retail sales, while hunting, liquor, and gas are showing really good growth, this is off the back of smaller categories in our table, and the larger collective building materials categories are down 3%, with cement volumes being down 0.7%. These categories will remain under pressure in the current economic environment.
Looking at fuel, we experience deflation of 12.4%, and although liter growth of 16% is reported in this Agrimark segment, this refers to nine Expressmark sites, which were taken over from the PEG segment to achieve management and administrative efficiencies. The like-for-like volumes in the segment were actually only down 1.2%, which is actually very good given that there was lower load shedding fuel demand during the period. This annualized during March. The second half should show evidence of our efforts to expand our farmer fuel as per the strategy. In terms of online sales, we have over 50,000 SKUs active on our e-catalog, of which about 9,000 SKUs are available from our DC, the rest being in store. Western Cape currently generates the highest percentage of sales, around 40%, with Gauteng a strong second at 30%. Our current average basket is ZAR 1,220.
Trading profits were up 4.6% off the back of sluggish stock sales in this segment in agri inputs and retail, while agri input direct sales were very healthy. After OPEX growth of 7.3% due to the additional nine sites added, PBT for the first half was only up 2.3% after also earning less interest on lower rates and lower debtors book values. The lower debtor book values also being impacted by lower fuel prices. The most important point I think to note within this segment is on the bottom right-hand side. This is the changing trend of the past few quarters. The Agrimark store operational PBT has trended upwards from being down 32% in quarter four of last year to a growth of 2.3% in quarter one of this year and a growth of 11.6% in the second quarter.
This is a very good trend and very positive going into the second half. The first half of the Agrimark segment in summary was impacted by fuel deflation, which impacted total revenue value by 3%, growth in direct agri input sales at low margins but gaining market share, lower load shedding fuel demand, which is annualized in March, sluggish general retail sales, and lower cement sales. At the same time we had lower credit sales, lower interest rates, and lower interest earned. The outlook though, very bullish, having had a particularly poor second half of last year. Our agri infrastructure market share gains would seem to be continuing into the quarter three period. Agri sector outlook is very good, even with the US tariff outlook and risks that seem to be on the horizon.
Credit sales book should grow as evidenced by the end of March uptick we have seen, while moderate growth and margin pressure expected in general retail. In terms of PEG retail operations segment, a few key points we should highlight. PEG is the largest independent operator of retail fuel and convenience centers in South Africa. There are currently 76 sites in the network, many of which are prime sites, and we currently operate 319 retail convenience touch points at these sites. Very much a retail business and more of a retail business than a fuel business. The fuel market is still highly fragmented, with our sizable network still only representing approximately 3.7% of total retail volumes in South Africa. We are also leading franchisees in the Famous Brand and KFC stables, reinforcing our diversified retail customer base.
We also believe that the traditional fuel station sector will continue transforming towards a services-driven convenience network. In our case, nearly 60% of trading profits are realized from convenience retail activities and only just over 40% from fuel and lubricants. It is still our view that investors undervalue our retail convenience offerings and cash generation capability out of this segment. The PEG business growth strategy will be driven mainly by service station footprint growth and supported by QSR expansions and operational efficiencies. Overall, the following items can be noted in the first half: nine sites were moved to the Agrimark network, as can be seen in the reduction in number of operating units and retail touch points.
Secondly, the Easter holidays has fallen into April this year compared to March last year and is estimated to be a ZAR 9 million-ZAR 10 million profit before tax swing between the two halves, while we received margin relief from the DMRE in the form of an increased entrepreneur margin per liter during the period. In terms of fuel, an average 35 million liters were sold per month in the segment. The fuel price was on average 12.4% lower, resulting in lower revenue value. The fuel price adjustment gains were ZAR 7 million lower in the period. Petrol has continued its gains in the fuel mix sold, which is good due to higher margins earned thereon. Overall, like-for-like volumes were down 3.2%, of which 1% can be attributed to the Easter holiday swing.
From a convenience retail point of view, PEG has completed five QSR upgrades and revamps in the period, and the first Hungry Lion in South Africa at a service station was also added in our group. It is managed by Hungry Lion. The good statistic to note is that our retail conversion rate, now what that is, is your ability to sell retail compared to the liters that you sell, our retail conversion rate being up by 7.8%. Convenience retail, like-for-like, only grew by 1.8%, and Easter is estimated to have cost 2%. Another good trend is the continued margin per liter sold, which has grown further by 6.8%. This is simply total gross profits earned by every liter we sold, having moved up from ZAR 3.74 per liter to ZAR 4 per liter. This is all resulting in PEG's PBT down by 11.8%.
Although when considering the impact of the nine sites, the fuel price adjustments, and the Easter holiday swing, we are quite happy with the positive trends in the key profit metrics, as just mentioned. Data has continued to be pared down in the segment, and cash generation has remained strong. In summary, the first half of PEG segment saw gains in margin per liter and retail spend per liter, supported by QSR upgrades and revamps. There were no footprints added, and the main drivers of the lower profit just being firstly the nine sites that were moved, secondly the lower fuel price gains, and the huge impact of Easter. The foundation of PEG is however very solid. From an outlook point of view, the picture is very positive, with seven new sites in the pipeline, of which five should be onboarded in the second half of the year.
We have a total of eight upgrades in the pipeline and nine new QSR offerings in the pipeline, as well as collaboration with Engen and Woolies on the off-the-dock Uber expansion opportunity. We are looking forward to a great second half in the financial year in PEG. Let's move to the Agrimark grains segment, the management of which has actually formed part of the Agrimark team, but due to its significance in the Swartland area, we continue to add detail on this segment. The strategy for this segment is to maintain and grow market share of grain handling and storage in the Western Cape. The 2024-2025 wheat yield was 15% below average, and that related to 11.4% lower harvest intake. Wheat price was also lower in the period, and traded volumes were lower, resulting in lower revenues, although again, just recall that revenue doesn't drive profits in this segment.
Invested about ZAR 27 million in handling and storage expansions over the last five and a half years, and will continue this in quarter four and quarter one of the new year. Profit before tax reduced by 9.8%, although our first half is always larger than our second half, we expect increased alternative grain storage opportunities in the second half of this year. Return on net assets remains very good in this segment, and the second half outlook is solid. The full year negative impact of lower wheat harvest should be limited. Now to the manufacturing segment, which focuses on farmers mainly in the fruit, vegetable, and sugarcane sectors. The strategy was unchanged while business focus was to grow sales. Our communicated intention to exit the manufacturing segment is progressing very well.
With load shedding and high interest rates less onerous, we see farm infrastructure spend robust and has improved during the period. Tego bins and crate sales unit growth was achieved on the prior year, while Agriplas's performance was solid. The PBT drag is still evident, and margins in Tego were under pressure while we were gaining market share. OPEX was well managed in both units. I hand over to Graeme.
Thanks, Sean. The group's cash flow generation remains strong, with almost 70% of revenue being cash revenue. This ratio has stabilized now that the PEG acquisition, a large cash revenue contributor, has annualized. Working capital has been managed effectively. Inventory reduced by 6.8%, with continued focused approach to holding the correct levels of appropriate stock. The impact of centralized procurement and distribution and the higher contributions of quick-moving convenience retail and fuel stock supported the inventory reduction.
Although trade debtors ended the period 0.9% higher year-on-year, average debtor balances were 2.6% lower during the period compared to last year due to lower credit sales. Courageously, debtors not within terms reduced by 1.2% of trade debtors. Trade creditors were ZAR 244.7 million lower year-on-year. As reported last year, due to Easter falling over the March month ending 2024, one of our large fuel suppliers drew their March payment later than normal, resulting in ZAR 211.2 million being paid in early April, and this did not reoccur this year. Also very important to note as in previous years is that seven months of supply payments are made in the first six months due to the timing of year-end supply payments, and this normalizes again across the full year when reduced supply payments are made in September.
Capital spend during the period was contained and lower due to delays in fuel site acquisition license approvals. Interest paid reduced year-on-year on the back of the reduction in net interest-bearing debt, albeit that interest rate reductions were slower than anticipated. Lastly, the final dividend paid relating to 2024 was just short of ZAR 100 million. In summary, a healthy and well-managed cash position for the period, showing similar trends to last year. Capital spend will accelerate during H2 as new fuel site licenses are finalized. With regard to capital expenditure, capital spend was suitably contained to ZAR 76.4 million, which included ZAR 28.5 million spent on various earning enhancing expansion-related projects and ZAR 35.3 million for replacement and upgrade capital expenditure. ZAR 12.6 million was allocated to alternative energy installations, and we continue to evaluate the feasibility of alternate electricity generation at a number of sites.
4.7 million of capital was released through disposals. Capital was well allocated across the major operating segments, being Agrimark and PEG. Included in Agrimark CAPEX is the new ECOPA store in KwaZulu-Natal. PEG CAPEX was spent on site and QSR upgrades and expansions and alternate energy installations. Agrimark grain storage capacity was increased, and in our corporate space, we incurred costs in terms of our long-term ERP modernization project. As mentioned earlier, we expect capital spend to accelerate during H2 as new fuel sites come online. Credit remains a growth enabler, and despite a subdued trading performance, the debtor's book has performed exceptionally well throughout the period and remains very healthy. The next five slides go into a bit more detail regarding our debtor's book, debtor's model, and the characteristics of the book that reduce overall credit risk.
Our strategy to grow the debtor's book remains key to our business model. We provide production credit to facilitate purchases from our various trade and retail offerings. Through our stringent vetting process, we consider a wide range of variables, including financial and non-financial factors, as well as the nature and value of securities provided. The resulting credit rating is considered when determining the approved facility value and the interest rate to be charged. Across the book, we make in the region of 250 basis points net interest received on all accounts. Our debtor's book grew by 0.9% at half year on the back of lower credit sales and turns 4.1 x per year, slightly down from the 4.5x last year. The book consists of over 16,300 accounts, with about 20% of these accounts being seasonal in nature.
These seasonal accounts have payment terms ranging from 3- 12 months, depending on the cash flow cycle of the underlying product being produced. Monthly accounts are strictly 30-day accounts. The contribution of debtors by product type at March was fairly similar to last year, except for grain, which ended slightly higher. Our bad debt write-offs continue to be very low and reflective of our strong vetting and control processes and the quality of underlying accounts, with only 0.02% of the book being written off during the six months. The five and 10-year average bad debts written off remain very low. I expected credit loss provision increased marginally to 2.6%, up from 2.5% last year, and equates to seven and a half years' worth of bad debt write-offs based on the ten-year average.
Moving on to our not within term debtors, the monthly year-on-year trends have remained similar due to the various product-linked account payment cycles. Year-on-year variances occur when payments are delayed due to specific events such as seasonal timing. Over the past five years, we experienced unpredictable and challenging agricultural and economic conditions that significantly impacted producer cash flow. Notwithstanding this, our book remained healthy, and our default rates have stayed low. Not within term debtors have reduced by 1.2% of total debtors on a year-on-year basis, an outstanding performance. As indicated in our previous webcast, included in the 2024 year-end not within terms were certain citrus accounts from 2023. The collection period for these accounts has been quite long due to the nature of securities held and, in some cases, the ability to settle with proceeds from new and different harvests.
A significant part of these not within terms have been settled, as can be seen by the sharper decrease in the black line in March this year compared to previous years. March not within terms would also have been lower had it not been for some overdue wheat accounts on the back of last year's poorer harvest. These wheat accounts are expected to be largely settled by July. Also affecting March not within terms, but to a lesser degree, were potato accounts in the Northern Province impacted by weather events. Deferred payment arrangements have been made on these accounts. Agri conditions looking forward are encouraging and bode well for continued facility repayments. Our book remains healthy and resilient, with continuing low default rates and good securities in place. We are comfortable with the book and consider it suitably provided for, given the track record we have with our long-standing customers.
This graph reflects the debtor's balances by month by underlying product group from March 2024 to March 2025. As you can see, we provide input credit for a wide range of products. The various product groups have different harvest timelines and, as such, different cash flow cycles, which collectively is positive for the group cash flow cycle and also reduces the risk of any single cash flow constraint event in the group. Important to note, the only significant product group exposed to dry land farming is wheat in the Western Cape region, and also the large table grape exposure during December to March is driven by harvest-dependent packaging material. Products such as vegetables have a quicker turnaround time from input to harvesting, resulting in more constant debtor's balances. Ultimately, a good spread over the various product ranges, which reduces risk.
Total debtor's balances for the 12 months have been lower than last year on the back of lower credit sales and impacted by lower fuel prices. We are pursuing numerous growth opportunities, both through doing more business with existing customers as well as growing market share with new customers. Our agri strategic focus revolves around water-intensive farming areas, and this graph shows the credit sales by month by river system from March 2024 to March 2025. The areas with the highest sales are the Berg River and Hex River systems, which align to the wheat and table grape information on the previous slide. The wide geographic distribution on the debtor's book is evident and ensures the impact of regional weather or other challenges is lessened, in addition to also smoothing the cash inflow from debtors due to different harvest times. We operate with decentralized credit teams in all the regions.
We engage face-to-face with customers supported by a centralized credit vetting office. Credit sales for the period were 3.3% lower year-on-year, and as mentioned on the previous slide, good growth opportunities exist. This slide sets out how long our customers have been with the group and the risk rating spread. More than half our debtors by credit facility value have been with the group for more than 10 years, and almost 80% have been with us for more than five years. Less than 5% of debtors have been customers for less than two years. It is clear that a very large percent of our debtors have supported the group for a long time, which speaks to the low default rates we are able to achieve. We hold strong personal relationships with our credit customers and are very familiar with their individual operations.
With regard to the risk profile of the book, 61% of the book is considered to be low and very low risk, with less than 1% being seen as very high risk. The book is well managed, stringently vetted, diversified from a product and geographic perspective, is an exceptionally low default ratio, and is suitably secured. Furthermore, we are well positioned, given the positive agri conditions being experienced in our areas. Our strategy to grow the book through responsible credit granting continues as we leverage credit to drive sales. Sean will close out from here.
In terms of conclusion, the first half review being that we generated ZAR 557 million EBITDA in the period, and although 2% below last year, the positives were Agrimark market share gains and reduced working capital. The Agrimark Quarter 4 to Quarter 2 to Quarter 1, huge improvement.
The PEG margin improvement, as well as the retail spend conversion rate increasing. Overall, OPEX very well controlled at only a growth of 1.9%. CAPEX spend low, a healthy balance sheet, and increased interim dividend. From an outlook point of view, the half two last year was really poor. We expected a significant improvement in the half two of this year. PEG, Easter holiday swing will be really great. Very healthy new pipeline sites. Upgraded pipeline is very healthy, and new QSR pipeline is also very healthy. We can also report that the Easter holidays this year in April were stronger than the Easter holidays last year in March, with petrol trending up quite clearly in the period, indicating more traveling by commuters.
Agrimark profit before tax, as I've said, was at -32% in the last quarter of last year, was +2.3% in the first quarter of this year, and 11.6% in the second quarter of this year. This trend continues upwards. This is about strategic execution, and we expect wheat plantings to be normal in the period. Most of our agri subsectors are showing very positive signs. The agricultural business chain confidence index is on a high at the moment, and unfortunately, general retail pressures are expected to remain. In terms of the tariff issues, the estimated risk in our business is 2%-3% of our F25 EBITDA, but really only if nothing is done about it and if nothing is negotiated with the counterparties in the U.S.A. We thank you for your attendance to the webcast. We will now respond to any questions that have been sent in.
Thank you. Thank you very much for the questions that have come in. The first one, very insightful question. [Kwabus], thank you. Just in terms of the second half, where we believe we can see a significantly improved performance, how does one model that? Would it be better than half, second half of two years ago, or how does one rate that against the second half of last year, which is a low base? In terms of that question, the main reasons we believe it will be a bit off is obviously the Easter holiday swing, which is quite significant in PEG. We have the onboarding of the five sites, and then based on the F23 performance, yes, it is a good second half to compare against. We would expect the like-for-like business to be similar to F23. Going to have a look at that.
It was significantly better than the second half of last year. Apart from that, we also are tracking, obviously, the Agrimark's Q4 last year being - 32, Q1 + 2, and Q1 + 2 and Q2 nearly + 12. We believe that that performance is quite solid, given the base of which it's coming from, being market share gains in the virtual channels we are chasing, as well as improvement in farm spend in the Western Cape that's starting to come on track. That's in terms of that. There's another question around the nine sites, which we've moved from PEG to Agrimarks and whether they included the four TFC fuel sites, which previously we reported as underperforming. The quick answer to that is no, it does not include the four sites.
Those four sites still remain in the PEG stable and are currently a drag of around ZAR 5 million per annum on PEG. They are also not that significant in terms of the total, but have not moved to the Agrimarks. Those nine sites that have moved were particularly where we can join management and achieve efficiencies in administration and management. Another good question is when KAL would expect to exit the manufacturing unit, and would it be through a formal sale process? Yes. How would proceeds be used out of that sort of a sale? Obviously, the matters are sensitive of nature. At this stage, there are certain conditions still to be met. We ideally would like both transactions related to the manufacturing exit to happen in this financial year. What would we utilize the proceeds for? Two things.
It would immediately reduce debt because of the cash coming, cash positive cash coming in, which would potentially could be used for the expansions we have and the five pipeline sites we have in PEG to cover that initially while we refinance those deals and/or put us in ability to again improve the dividend in the second half. Essentially, it would reduce debt and it would improve our return on invested capital in this year if it did happen. Another question, Graeme, maybe for yourself. As we successfully reduce the leverage, is there an opportunity to refinance remaining debt at sharper edge? Can we speak to the debt maturity profile and any refinance requirements?
Yeah, thanks, Sean. If we look at the total net interest-bearing debt, by mid-May, we would have fully settled two of the long-term debt obligations.
In 2020, we entered into a ZAR 250 million and a ZAR 200 million term debt obligation, which, as I say, is being fully settled with the last payments now in May. I think we're nearing the bottom end of our debt-to-equity reduction journey. We're probably going to get to the low 40% or so before we start to tick up slightly given the PEG site acquisitions. In the same breath, if we are successful with the manufacturing exit and that cash flows in, it will negate some of that uptick. Taking the May term debt repayments into account, the remaining term debt is around ZAR 430 million, and that's payable across June and December this year, with a bullet next year June of around ZAR 280 million, which we would definitely consider refinancing.
Looking at the rates, or the question on the rates, I think our rates are exceptionally competitive. We've got access to capital for expansion at really good rates, and we continue to engage with our existing bankers on more favorable terms, as well as with other finance providers. Our term debt structure is such that by the end of June next year, we'll be down to ZAR 280 million, and the rest is all shorter-term debt, 12-13 month type of primary lending facilities.
Thanks, Graeme. There's another good question. Expansion of fuel sites, if that continues in the second half and ticks up, will this impact efforts to reduce debt in the second half? I think what you just heard from Graeme is not really.
We do expect to go to the low 40% on debt-to-equity and slightly tick up the five sites to be onboarded in the second half. Graeme, correct me if I'm wrong, around ZAR 100 million, around about, so are not, again, are going to be significant in the uptick of the PEG performance profitability-wise, but not necessarily a huge impact in terms of our debt-to-equity, a few percentage points.
I think if I can just add one thing there, Sean, the important thing to note on a fuel site acquisition is your cash requirement is only for the acquisition. Your working capital, there is no working capital requirement. Your fuel turns quickly, your supply payment terms are slightly longer. From day one, you do not have a working capital requirement, and you are generating cash immediately.
We can see with the PEG acquisition how successfully and how quickly we've been able to knock down that acquisition debt.
Thanks, Graeme, for adding that. Graeme, a question that is obviously also relevant is that in the past, we said buybacks were a lower priority as the share price was roughly at NAV, which was a fair comment at the time. Thank you, Matthew. Now that the argument falls away, obviously, somewhat at ZAR 40, do buybacks get revisited? The immediate answer from my side is obviously, and have already been, but Graeme, maybe elaborate a bit on that.
Yeah, the consideration of share buybacks is less so around the NAV and more so around the capital allocation. From our perspective, share buybacks are considered against other capital allocation opportunities.
When we look at our F30 strategy and the capital and working capital required to achieve those targets, the returns on acquisition and expansion opportunities currently outweigh the benefits we can see from a potential share buyback. Yeah, to Sean's point, share buybacks will remain on the agenda as a capital allocation option, but we'll consider those against other opportunities on an ongoing basis.
Obviously, the increased bond rates come into play when we're looking at our WACC and all those sort of things as well at the same time. Just another question, why do we believe the tariff issues are a low risk of only 2-3% of EBITDA? The main reason for that is that even calculated by BFAP, the tonnage exported of our fruit, nuts, and wine to the USA is only about 3% of tonnage. It's about 5% of value.
In our case, because we're exposed, yes, to a lot of fruit exporters in South Africa, it has been part of our business strategy over many years to diversify the business into those water-intensive areas, yes. We still believe that it will be limited from a risk point of view to reduce pricing realization from the farmer level. Obviously, if nothing gets done about the negotiations that we do know are underway in terms of finding a way to get reciprocal tariffs with the likes of Chile and Peru, which if they do happen, then actually the impact would be relatively low and limited to citrus in the Western Cape, wine in the Western Cape, nuts countrywide in the main. Another question, Graeme, which I think is a good question, why up the dividend while earnings were flattish?
Despite our recurring headline earnings decreasing slightly, the board approved a 3.7% increase in the interim dividend. This was really off the back of a solid H1 performance, our continued debt reduction, good cash management. You see our working capital well managed, our capital contained, our OPEX has been well managed as well. From that perspective, we're sitting with a very strong gearing position, and our balance sheet looks very healthy. Obviously, we look at solvency and liquidity. We look at forward-looking cash flows. Ultimately, all of this supported the decision to increase our dividend at this stage.
Thanks, Graeme. Another question is details that we potentially could provide on the new business segment that is part of the F30 business strategy. I think at this stage, the details we can offer are really just the principles around the matter.
Most likely multiple investments, most likely investments in related business ventures, most likely initially minority investments, most likely in agricultural data, tech, AI, most likely in related general retail assortments that would support what we do today. We have a very particular, how can I call it, structural tick we'd like to see in terms of potentially a family business progressing and growing into a more corporate business venture. Yeah, that's probably the detail that I could offer at this stage. It's quite exciting. We know what we want to achieve there. We'd like it to be supportive of the current business ventures that we have. Another question was really just, okay, how was Easter, the holiday spread this year versus the prior year?
Given that it's fallen into the second half, we can tell you that the Easter holiday spread in April has been better than the Easter holiday spread that happened in March in the prior year. At this stage, it would seem that we've got to the end of the questions. Let's just have a last check here. Okay, yes, good question. The road closures of last year were a problem, and we expected to reduce. How has that evolved? The good news is they did reduce. The bad news is that they then moved to others, so they are still there to an extent. We did have some really high volume bumpers affected by road closures last year. Yes, that has precipitated. We probably are more back to a normal situation in terms of road closures.
I mean, there will always be some form of a road closure that's impacting us somewhere. I mean, you can't have 80 sites in the country and not have some form of road closure. Yes, it is better. It's probably still another 1% in terms of leases, which, yes, could have been significant for us. Yes, we would expect it to improve slightly better going forward. I think we've got to the end of the questions. Yes, that seems to be it. I thank everyone for joining in, and we hope our expectations do realize. We are quite robust and bullish about them. Thank you very much.
Thanks, everyone.