Earnings Call: H1 2021

Feb 24, 2021

Please standby. And welcome to the Convita Fiscal Year 'twenty one Half Year Results Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Nigel Greenwood, Chief Financial Officer. Please go ahead, sir. Good morning, everyone, and welcome to the Comvita half year results presentation for FY 'twenty one. With me, I have Mr. David Badfield, the CEO, and I will hand over to him to start the presentation. I'll be back a little later and fill in some gaps as well. Tanakoto Katsu, Namai, Harimai. Good morning, and welcome to the interim results presentation from Kumbita. As you can see on Page 1, the focus of today's presentation is focused on Aratahi. And it's a continuation of the theme that you certainly heard from me and from the team since this time last year when I started. I'll now move on to Page 3, the agenda. Over the course of the next sort of half an hour or so, we will run through our focus. We'll run through our results and then we'll come back to our 3 point plan of to stabilize, transform and build long term resilience and growth at Convita. Next page, Page 4. In October, we shared our redefined cause. This redefined cause drives and frames our action as an overall organization. And as you can see, working in harmony with these and nature in New Zealand to heal and protect the world. Next page. We also reiterated our absolute focus on the consumer. Our model there, our focus model really revolves around the consumer at the center of everything that we do with the right product in the right market through the right channels, allowing us to ensure we can invest in brand IP science, reduce risk along the way. As we invest in science, we get improved quality and our vertical integration then means that that feeds back into the right products and round we go again. On to next page, as I've previously shared, Convita has a unique business model in the category. The slide here really tries to capture supply side and demand side and evidence Convita's unique end to end business model. The real difference is that by having our own people in our own subsidiaries around the world, we should be closer to customer, closer to consumer and in that more intimate relationship make sure that we're able to respond at speed as we meet those emerging market needs. And I'll share some examples as we go through today of when and how we've done that. Next page, just before I move on to results, I did want to start from talking about impact of COVID. First off, from the team. Clearly, the world has fundamentally changed as a result of COVID and so have we. Our primary focus has been on the health and wellness of our team around the globe and particularly pertinent for us when we are in somewhat of a bubble in New Zealand, but our operating teams have been affected and are currently still affected by lockdown. Pleased to say that all our team are safe and well, though clearly some family members have been affected. Around the world, the team response has been amazing, Particularly as we've moved into the COVID period, we were also starting our transformation journey at Convita. We are proud to be part of the solution for consumers around the world, and we do believe the longer term trends with consumers turning to nature and natural products, the solutions to their health and wellness needs have continued. When we then change that and we look at segmentation of performance, what we really see is 2 different types of market segmentation. Balance distribution, those markets with balanced distribution model and those markets with a narrow distribution model, And I will turn to each of those separately. So next page. When we look at the balanced distribution model, this is with a good balance of offline and online sales. This represents about 2 thirds of our total revenue. All of those markets have performed well. It has the balanced distribution has enabled us to fulfill consumer needs or when there's been any disruption to pivot to actually meet that. We've got good brand affinity and growing. There's a recognition of our quality. We're growing share. And our differentiated model does enable us to connect and act at speed to meet those needs. On the flip side, in our narrow distribution markets, which represent about onethree of our revenue, those always markets have struggled with top line performance and reliance on a particular group of customers. They all have similar characteristics, though the actual route to market does vary. There have been some ongoing goals in that with a lack of with previous distribution focus and a lack of digital capabilities. From a supply point of view, we have good inventory levels in market to meet demand. And again, our model has meant that any increased lead times particularly and cost to fulfill highlight the benefit of having our own teams on the ground in market. Next page. There has been a fair amount of press recently about standards and global regulatory framework. Convita support the goal of the highest possible standards for all New Zealand honey. We have one of the most advanced in house honey laboratories in the world, which was established in 2012. We're independently audited by a number of external authorities such as MedSafe, NPI. We've achieved AA rating with CRC, British Retail Consortium, who act for a number of companies around the world. And the AA rating is the highest you can achieve. We all our products are tested for and meet the glyphosate standard as not detectable. I think it's also important to say whilst our business is founded on science, we over this next chapter, we want to make sure that science remains central to our long term opportunity. Our Chief Science Officer, Doctor. Jackie Evans, is part of the leadership team. And as part of our 5 year plan, we are committed to invest 1% of our earnings in science until 2025. Next page. So I'll now move on to the headline results that we shared today. I am encouraged to report that for the 6 months ending 30th December, we have a reported net profit after tax of $3,500,000 versus $13,000,000 loss in the PCP. At an EBITDA level, EBITDA reported at $10,600,000 versus an $8,800,000 loss in the PCP, which is an improvement of 19,400,000 Revenue increased by 5.4 percent and GBP 6.7 percent in constant currency. We delivered double digit top and bottom line growth in our focused growth markets. Gross profit improvement of 10.80 basis points. We've increased marketing investment by 25% as we look to tell our story to consumers around the world. The $15,000,000 transformation plan that we shared last year is on track to deliver. In addition, we've reduced debt, we've reduced inventory and we've seen a cash inflow of $9,400,000 Our focus on health and safety has also seen a 37% reduction in our total recordable injury frequency rates. But we have maintained our guidance and dividends are expected to resume at our full year. I'll now hand over to Nigel. Good morning, everyone, again. We're on the key financial results page, which I actually don't intend to work through with you again because really the majority of the numbers on here and the key matters on here were addressed by David on the headlines page. So, I'll move on to the next page, the $15,000,000 transformation update. Now David mentioned that, that is we've made very good progress on that. And this has been evidenced through strong improvement in our both our dollar and percentage gross profit achievements in H1. We're on track to deliver underlying cost reduction of circa $5,000,000 for the full year, which is also an excellent outcome and reflects the focus and resilience we have in the business as we look to transform and improve and simplify the way we do things. We are investing $1,500,000 per year to ensure that we can deliver on this transformation program. It doesn't happen by chance. It takes focus, and it takes investment to get there. We're on track to reduce our SKUs by 30%. We've initiated the process to tidy up our legal entities around the world and reduce those and have a much simpler corporate structure. And we have exited Sea Dragon during the course of the first half. We are on track for completion of the $15,000,000 transformation program by January 23 latest. During the first half, we've also committed to a further $10,000,000 transformation program. We believe we have the necessary capability and processes to enable that over the next 3 years, targeting completion by June 24, and that will be through a focus of increasing our gross profit percentage even further by 400 to 4.50 basis points, along with further cost reductions, and these are in addition to the $15,000,000 transformation program I previously talked to. Next page. Cash flow inventory and net debt. Moving on to cash flow. Very positive cash flow in the first half. You can see we delivered $9,400,000 of operating cash flow in the 1st 6 months compared to only just short of $1,000,000 in the 1st 6 months last year. Our investing activities of $5,700,000 really continue primarily to reflect our investment in our plantation strategy as we continue to grow the number of plantations we've invested in throughout the North Island. Financing activities, they reflect the fact that we're paying down both debt and our lease liabilities, which has already been indicated in respect of our reduction in net debt. Next page, inventory and net debt. It's very pleasing to see that our focus on reducing our inventory in the business is continuing at $98,000,000 at the half. It's considerably down on both same time last year as well as 30 June 2020, seeing an $18,000,000 reduction over the last 12 months. Trade receivables remaining relatively in line with the same time last year, a little bit better. Working capital significantly better than the same time last year. Net debt down to $13,000,000 We're on track to continue to reduce our net debt by the end of the financial year. Overall, a very strong and healthy balance sheet. We continue to reflect what we refer to as our underlying earnings reconciliation. We presented this at both the half year and full year for FY 2020. It's pleasing to note that we don't have any non operating items to add back this year. You can see we had quite a complex underlying earnings reconciliation this time last year. However, there were some one off costs that we just feel that we should highlight that occurred during the 1st 6 months. The first one is the April cost reduction. I'll actually come back to that in a minute to explain what we've done there. The R and D grant income of $700,000 that we've treated that as a one off upside because, in fact, that particular R and D grant related to FY 'twenty and not FY 'twenty one. That is a very positive number in any event. Inventory write downs we incurred, we've treated these as one off because they relate to non manuka raw honey as well as some properness inventory that are legacy items. So, not in a normal course of business, and we've written those down in order to move them quickly. We continue to invest in our transformation $450,000 there. And overall, we can see the impact of our underlying result of $12,600,000 dollars Impact on the harvest. So, this is where I'll quickly address the A3 cost change in accounting treatment, but we continue to focus on high quality and lower cost in our Apery business. We're reducing downside risk. And we had mentioned earlier in previous presentations, the way we've changed our business model in the Apery business means that in a poor harvest year, we are confident that we will breakeven rather than incur significant losses as has been the case in the past. And a good year, we expect to generate between $2,000,000 to $3,000,000 of profit from that business. You'll note that we've taken a more balanced approach to the way we treat some of our Apri costs. And as a consequence, we've taken up $1,100,000 in Apri costs in the first half. This is a change in accounting treatment, And it's really the balance out across the whole season the risk that we see that's evident in every year that we have a harvest. This will be an ongoing accounting treatment process, so you expect to see it year on year. It does unwind in the second half. So where are we with our honey supply for 2021? Well, there have been some weather condition impacts that have occurred during the year, but we're still at a point of the season where it's too early to tell exactly how our honey harvest will work out. We do focus on 3 key criteria: the yield, quality of yield and the cost to extract the honey. We will provide the market with an update of our full season performance in terms of our honey harvest either in late April or early May. I'll pass back to David to deal with market segments. Thank you, Nigel. Just wanted to clarify one thing very quickly on the Apery business and that is in a good year, the Apery contributes about $2,000,000 to $3,000,000 that Nigel said to group profit. And in a poor harvest, what happens is the contribution to group profits becomes 0. So just to be clear with that. So moving on to market segments, I'm going to share with you our segment performance. Yes, headlines here, look, our business model is unique, as I've already shared, with our global market in global subsidiary team, close to customer, close to consumer, faster to act, primacy of market, making sure we've got talent in market, really pleased with some of the enhanced capability we've brought into our international teams, particularly in China through the course of this year. We delivered strong growth in our focused growth markets, mainland China revenue up just under 20%, net contribution up 28%. North America revenue up 38%, net contribution up nearly 2 20%. When we come back to that segmentation that you see, all the markets with balanced distribution model are performing well and those markets with a narrow distribution market are underperforming. But clearly, we've got plans in place to change that model. The balanced model does also show the operating leverage potential that we see going forward, which is an important part. In the course of this year, we've increased marketing investment by 25%, and that really allows us to refine and tell our unique why it can be the story. And again, I'll come back to that a little bit later. The next page breaks down the performance through those balanced distribution markets, the limited distribution markets and other. I'll cover those as we come to the actual markets themselves. But you can see the characteristics in terms of the revenue we've achieved, the performance we've achieved, the typical share of digital within them. Our focus is really to build momentum in those markets and deliver profitable growth in other markets. The biggest issue, and again, Nigel will talk to this in a minute, in terms of dollar issue to resolve is the Australian market, where revenue was down $5,500,000 versus the PCP due to the points that you see there. Next page. So I'll then move on to the world map in terms of revenue. Encouraging to see North American growth, Greater China growth, Rest of Asia growth. UK is flat, but again, I'll come back to UK when we talk about more about profitability. And you see the issue that I just shared in terms of assets. We have been impacted by FX. So we've included a constant currency performance so that you can get a like for like performance. So as you can see there on a constant currency basis, group performance up by 6.7%. At net contribution segment, so next page, you can see positive movement in China, rest of Asia and North America. And encouragingly for us, the U. K. Business has moved from a or EMEA business has moved from a loss of $1,000,000 in the PCP to a breakeven business. And then you see where we've been able to mitigate some of the impact in Australia and New Zealand through careful management. Next page, I'll now talk to our focused growth markets and then I'll hand over to Nigel to sort the other markets. So focused growth markets China and North America. Our model is about structured long term investment to grow both market and market share. Our current business model there is the balanced distribution model, and I believe that's what's reflected in the performance that we've got. In Greater China, which includes Hong Kong, we you see our total revenue increased by 8.6% and our net contribution by 42%. We have been impacted in the Hong Kong market at top line, but actually we've delivered profitable performance at bottom line. Next page, I move on to Mainland China. And on a reported basis, encouraging to see that top line growth just under 20%, over 20% on a constant currency basis. China is the world's biggest honey market. So it's encouraging to see that we're delivering that with our people on the ground. We also increased brand investment by nearly a third or actually a third to build that long term brand royalty and advocacy. But also we're able to see that net contribution all through. In North America, on a constant currency basis, revenue up by just under 43% and net contribution up by 200%. Marketing investment again increased by onethree. Digital sales accounted for 41% of half one sales and were up 87% year on year, which also includes canvita.com. The significant contribution percentage increase is due to operating leverage, but also some timing of marketing activity, which has moved into H2. About GBP 850,000 of this is due to new business. Next page. Next page, you have the reported currency figures for North America, same commentary primarily applied. And finally, just the headlines for North America. We are the fastest growing Manuka Honey brand in the U. S. In both conventional and the natural channels based on sellout. We're increasing our latest sale per point of distribution, and we have good orders through the balanced FY 2021. We've achieved a 170 percent, 170 percent increase in our retail distribution in this 6 month period. And we continue to build that distribution and marketing, particularly where we're trying to build that model city. We've earned media impressions over this period of £560,000,000 which is up 24% versus BCP. And so I'll now hand back to Nigel, who will talk to the rest of the segments. Thank you. Welcome back again. I'll start out with talking through the risk of Asia, which and this is on a reported currency basis. You can see that sales are up 48% on last year, which is a significant improvement. Net contribution also well up 151% and now reflects almost 30% on a net contribution percentage basis. We continue our strategic focus for Manuka and Populace. We are now also focusing on a more balanced distribution model in these markets to keep sustainable success. Moving to the ANZ performance, the markets where we have had some challenges over the last 6 months. Starting with the combined on a constant combined results for Australia and New Zealand on a constant currency basis, you can see that our revenue is down 21% year on year. Mostly at the same time, however, that our net contribution is only down 5%, which does reflect that we are continuing to focus on managing our costs and our investments in that market so that notwithstanding the lower revenue, we are still generating, I think, a reasonable net contribution in that market. Specifically, turning to New Zealand and then Australia. New Zealand revenues, in fact, did improve on the prior year, 10.5%. COVID has impacted on the New Zealand market, just not as great as it has in the Australian market. We do continue to invest in our brand, but we are forecasting the decline in H2 due to ongoing impacts of COVID. In the Australian market, this is the market that's been most affected. Revenue has reduced by $5,500,000 versus last year. And it's partly and mainly caused by the narrow distribution model that David talked to earlier in the presentation. We do continue, however, to invest in the brand, and there is a major customer destocking occurring over the 6 month period. So, we do expect revenue impacts through to the full year. That's just to start moving to the next page, just on a reported currency basis. Moving to the EMEA performance for the 1st 6 months. Moving in as relatively being flat year on year. That reflects, I guess, the market where we still need to do more work and invest in growth in that market. Having said that, we have again looked at our business model and the way we operate in that market. So, the positive news is that we have achieved a sort of a breakeven net contribution versus last year, and that we see as a positive signal. Looking at it on a reported currency basis, you can see that it's also relatively flat year on year. I'll now pass back to David to take us through the final part of the presentation. So I'll now come back to our 3 point plan. So a year ago, we shared our plan to stabilize performance, transform the organization and build long term resilience and growth. It's we've made good progress, but we recognize equally there's a lot to do to deliver the true long term potential of Senvita, and that's what this plan is designed to be. So next page. Here, I'll try to capture the stages of development. So starting on the left hand side, our incredibly proud history, our market leading history and then how we look to progress to that exciting future on the right hand side. In the period between January 2020, you see I call the 3 periods call, stride, run. The things that we've done to actually set ourselves up for this next stage, this 2 to 3 year period when we learned to strive into that next phase to enable us to get to that June 24 position and then be able to really deliver that long term sustainable growth. Next page, I just wanted to share an update on the progress we've made. So simple traffic light systems, so again, stabilize, transform an organization and build long term resilience and growth. You can see the one red traffic light for us at the moment is that winning in Australia and New Zealand. And again, we've already talked to some of that. And a key part of our plan in Australia and New Zealand is to build domestic consumption of our world leading monitor and copalis. But across the rest of the areas, we've made good progress, but still space to go. Moving on to our stabilizing performance. So our goal is grow domestic consumption and relevance in ANZ, let's build brand awareness and loyalty, share our unique story, launch a unique experiential store, again, I'll come back to that in a minute, build authority and leadership with industry, education and like minded organizations. We want, in that stabilized world, all existing markets on track to deliver that balanced distribution model with an organization that delivers against those fundamentals that you can see there. We believe the real strength of the organization is primacy of market and making sure that we connect to our purpose and our values. Next page, transformed performance. This really again in the last year, we would have talked a lot about when we think about consumer, we think about activity that drives household penetration, activity that drives frequency of use and activity that builds brand affinity and loyalty. So that intimate relationship is really crucial for us to actually show that. We believe that there are more efficiencies to gain, which will enable us to tell our story to those consumers around the world and are a vital part of that future. All markets will transition to our balanced distribution model. We will have integrated, automated, scalable internal processes that again allow us to grow. Greater insight at hand driving decisions and continued radical simplification in terms of structure, in terms of SKU count and entity that Nigel mentioned earlier on. Next page. So finally, in terms of that long term reserve growth, we are looking to deliver mid single digit 5 year CAGR. We're looking to grow the total addressable market and the market share in our key markets. We have a 0 long term debt and 20% EBITDA model. We're looking to deliver double digit EPS growth on a 5 year CAGR brand to be recognized as a super brand, and we will launch new categories that will help us drive longer term earnings growth. We will partner with other global leaders to leverage our mutual expertise. We aim to be the best employer in New Zealand and that will enable us to attract, develop and retain our high quality team. We believe the best interest of all shareholders is served by our team being shareholders as well. And we've set out we're on our journey to become carbon positive by FY30. And the final point, we are measuring as a KPI for the business, total shareholder returns versus the NOK50. This slide just I shared at the annual shareholder meeting and it's just really if you look at China is the biggest honey market of the world, if you look at the total market and the share of imported honey today, the opportunity that it creates as we drive relevance to key target audience to grow the imported honey share of total. And it is important that we tell that story and why monocohoney, particularly from computer, is central to that growth. Next page. So in terms of building long term resilience and growth, in the top left, you can see an image of our new experience center, which will open in Key Street in early March, which will be an experiential immersive experience where we really tell the story of Convita and the story of the Hive in a really unique and compelling way unlike anything that we've done before. On the top right, you see our brand positioning in terms of only Nature knows more. We do believe that consumers will choose products that have limited or minimal impact or balanced impact on the planet. Our core value of Kaikeya Pitanga is reflected and you see our goal to be carbon positive by 2,030 and carbon neutral by 2025. And finally, on the bottom right hand side there, you see a new digital development, which will be coming again in early March, which will enable us to differentiate and tell our story to consumers around the world. Finally, moving back to full year guidance. Our full year guidance is a range of £20,000,000 to £23,000,000 in line with our previous disclosures and obviously subject to delivering our guidance to the Board as we confirm its commitment to resume dividend payments at the end of this financial year. So just in summary, our focus strategy is starting to deliver results, strong H1 result, double digit growth in focused growth markets, good performance in focused categories. We've simplified the business. We're launching a second transformation program, and our first transformation program is on track. We're reducing inventory. We're generating cash. We're paying down debt. And we're in the process of putting in place foundations for long term profitable growth at Convita. Thanks very much for your time. We'll now hand back to the moderator for any questions that you may have. Thank And we'll take our first question today from Joshua Dale with Craig's Investment Partners. Good morning, Josh. Good morning, Josh. Just a few questions from me. First of all, reconciling a couple of points you make in your commentary. The first thing, you're targeting mid single digit revenue growth. And second, you expect digital sales to lift from 32% currently to 50% by 2025. If you do the math on that, the implication is that retail sales will decline or perhaps be cannibalized by digital. Is that sort of what you're trying to communicate? Can you talk to that a bit more? Yes. No, that's exactly the point. I think that one of the things that we saw through the first half FY 2020 is if you look at the digital shift that took place in the U. S, we saw 10 years' worth of growth to that channel in 2 months or 3 months. And when we think about digital, we're sort of really trying to have a 10x mindset. And we believe that is a permanent shift. And that then it's really important that, again, we have that capability to support that permanent shift. Okay, great. Thank you. And just next question. On Slide 12 in your presentation, you talked about improving gross profit by sort of 600 to 700 basis points, excluding the impact of the harvest. If that improvement is independent of the performance of the apiary business, what's driving that improvement? Is it sort of either increasing prices or has the cost you purchased Honey for on market declined? Or what's your thinking there? Three things. Market mix, so more profitable markets growing faster. Channel mix, so digital channel being accretive. And finally, the benefits of focus on our core products of Monica and Topless. Okay, great. Thank you. And just in your segment splits, there's obviously a cost component to each. Do you spread the costs of the April business across each geographic segment? Or do they all fall into ANZ or all fall into corporate costs? The impact of the April business performance do not impact on the markets at all. They fall into the sort of not the AMZ market, but the sort of the corporate part of that segment reporting. So that's where you will see the impact of that April business performance this year. Right. Okay. So the contribution margin for each market is completely independent of April business performance? Yes. Yes, that's right. Thank you. And just last question from me on dividends. Do you have an indication around any potential payout ratio you'd be looking to target at the full year? No. Obviously, we have a stated dividend policy that we shared actually during the capital raise. But the Board will review the appropriate level as we check through HT. Okay. That's great. Thanks guys and well done on the progress you're making on your transformation. Thanks, Josh. Next, we'll hear from Christian Bell with Jarden. Yes. Hi, Nigel, Nigel, it's David. Just firstly, could I please just clarify a couple of things? The just for the $15,000,000 strategy transformation, in simple terms, is that split $10,000,000 gross margin or gross profit and $5,000,000 cost out at the OpEx line? Yes. Okay. Cool. It's a project we're making yes, it's a project we're making against those 2, Christian. So we're committing to achieving that $15,000,000 by no later than January 23, and we're making that progress on both improvement in gross profit percentage as well as cost reduction. Cool. And I think I slightly missed the questions in the call, which I think one of my answers. But the gross from a gross margin contribution, that's coming from just trying to understand what's actually driving it. And so can you just Yes. So Christian, three things. Market, so obviously, markets where we deliver a higher contribution, growing share. Channel, so digital channel being accretive and category and the benefits of our focus on Manuka and Propolis. Okay. And the $5,000,000 is just a bit of corporate structure? Yes. Look, we've I mean, we've made some fairly significant organizational changes and we continue to do that to enable us to better connect to consumers in market. And part of that is just being clear on the role of the markets and being clear on the role of the market support center in Pinera. Cool. Then on the gross margin perspective, how far through are you tracking like how are you tracking against that $10,000,000 at the moment? Like was that yes, can you squeeze me out to that? Yes. Look, well, you can see the improvement that we've reported in these numbers. So I think we have a good line of sight. So when we say that we're on track, we're a fair way through that process, which is encouraging. Was any of the gross margin uplift for that period due to a bit of quality honey? Not as much. No, it's more due to those points that I just raised. The last point, and I just should clarify this. When we talk about focus on Marnequah and Propolis, that's about the production efficiency we generate as we go through. So again, because we've stopped doing a number of things, it means we get better overhead recovery, better efficiencies through the plant. So that's a sort of a double edged benefit. Okay, cool. And as part of the new April E model, I guess, is it between years in between better crops of honey and whatnot? Are you aiming to smooth a degree of smoothing through by holding high quality honey from some years in selling and selling and selling over a bit? No. What we've done today actually just I mean it does move earnings. But we have our own business that obviously gets different quality or different quality of honey during different times. But the apiary model is more about making sure that, as I say, in a bad harvest or poor harvest, that just really a contribution to group profits from that. And in a good harvest period, we get the level of sort of $2,000,000 to $3,000,000 that we talked about there. And that will help us actually deliver yes, that will help us deliver more balanced returns half to half. Cool. Yes, understood. And then sorry to say more. For the additional $10,000,000 where is the gross margin coming from that phase? And also from the underlying cost reduction, like how are they separate from the first? Just because it's incremental too. So the program of work that underpinned the first transformation program, obviously we had specific tasks or specific elements to it. And these are additional things that we believe we can achieve by further investment on top of what was originally planned. Christian, we do have a number of initiatives both at the gross margin or improving our gross profit percentage as well as our reduction in costs that we are going to be focused on and putting into place to achieve that incremental $10,000,000 It's just not a number we're plugged out of the year and said, oh, let's just go for it. We do have some insights as to how we're going to get there. No, I'm not doubting that. Just trying to understand if you're just making the same drivers better or you're actually hitting new initiatives than what you're already doing. Okay. Sorry, just to clarify, it is just making the ones you're already doing better as opposed to adding a whole bunch of new ones? No, there's new stuff new things as well. Same with our core focus areas, but we do think that there are those opportunities to drive further or create further efficiencies. And we think, look, they're critical in terms of our longer term business model, which needs us to be telling that Y Comdata story. So we need to deliver extra efficiencies there so that we can invest in our brand and tell our story better around the world. Are you able to give an example of what one of those Not at this stage, but we will during the course of this second half. Okay. Cool. And so just finally, underlying EBITDA of 12,000,000 and full year guidance of 20 to 23,000,000,000, why is there no sequential growth in the second half? Probably a combination of things. So look, we did have a strong H2 last year. And we've still got that ANZ uncertainty that exists as Nigel highlighted when he went through that segment performance. And it is about, as I say, putting in place those foundations for years 2, 3, 4, 5 as well, which we'll continue to do. Sorry, sorry. I wasn't comparing it to second half last year. I was comparing it to the first half of this year. So you're going from 12,000,000 dollars And then if you're at the top end of guidance for the full year, then you're going from 12,000,000 in the first half to 11,000,000 in the second? Yes. Yes. But same reasons still apply. But you yes. Okay, cool. Thank you for answering my question. Pleasure. Thank you. We'll hear from David Oxley with ACC. Yes, good morning. Could I just ask one quick question? Can you tell me what the APRE contribution was in first half twenty twenty and what it's gone to in first half twenty twenty one? You obviously alluded to a $1,500,000 improvement due to the accounting change that's come through. What were the actual numbers? Thanks. You're asking about the April contribution in the first half? Yes. Yes. The second half? Yes. The first half this year, that's the first half last year. In the April business itself, the contribution that that business makes was all recognized in the second half. So if it's a good harvest year, the contribution we talked about between $2,000,000 to 3,000,000 would be recognized in the second half. And a poor harvest year, if there was no contribution at all, in other words, a breakeven, that would also be a second half impact. What we have done, however, is to acknowledge the fact that there are risks associated with that business and that in our view, it's prudent to sort of spread that risk across the full year rather than have that risk be entirely addressed in the second half. So under accounting standards, we've effectively got what we call an early recognition of some costs in the first half at 1,100,000 dollars that we've effectively been able to take up in the first half. It will obviously get unwound in the second half. And then the performance of the April business, either a positive contribution or a mutual contribution or somewhere in between, will be a second half impact. That's great. I understand. Thank you very much. We have a question from Richard Richard, your line is open. Hello. Thank you. Last year, you mentioned that the payback approach was at least 1 you're comfortable with. Seth, can we get you Richard, sorry. We're really struggling to hear you at this end. Okay. I don't think I can do anything about that. No, that's fine, Peter. No, we've got you now. That's fine, Peter. Can you hear me now? Yes. Okay. You mentioned that you were once you return to profitability, you'll be paying back wage subsidies for the COVID fee? Is that still on track? We did that. Yes. So we did that in half 1. Okay. Next question. It seems to me that the weather is more settled after December. Is there anything in your research and development to try and have manuka flowering at a more settled time of the year, which is after Christmas? I think we talked about when we're choosing sites, we try and choose sites where it does become later. But as you know, it's impossible to control what the weather throws at us. But yes, some of our sites are later. Yes. Okay. That's it for me. Thank you. Thank you. And I will actually we do have a follow-up question from Joshua Dale with Craig's Investment Partners. Mr. Dhill, your line is open. Hi, guys. Hello, can you hear me? Is that you, Josh? Or Hello? Yes. Can you hear me, David and Nigel? Yes, we've got you. Excellent. Thank you. Just one last one from me. In the segment contributions and the notes to your accounts, can you talk to what you've restated or reallocated in China A and Z and the other segments? And then there's also been a reallocation in corporate expenses too. They don't align with what was in your previous interim result. You mean interim results from last year? Yes. Yes. So, there is a reason for that. First off, we have we've done a couple of things. And one of the things we've done is that we've how we treat freight costs. So freight costs are now between that's not it. Well, then I suppose the other thing we've done is that we have reviewed the impact of integrating data from the China and Greater China market into our systems here at Puyangarang that was previously done manually. And what was discovered during that process is the way that the allocation of how I call intercompany profit and inventory has changed. And so it has resulted in a change to the numbers that we had presented in the last half year results to the numbers that we're presenting this year results. We can affirm that the numbers that you're seeing in the current results are the correct numbers. These relate to cross border sales between ANZ and China. Josh, we can probably go through it when we're done. There's an element of complexity to our China, but you're right, they have changed. We can take you through it. And look, we recognize obviously, we reflected the position in last year's result as well as the change in last year's results, so that it actually decreases as a percentage increase. No, that's fine. Look forward to chatting later on. Right. Okay. Thank you. That will conclude today's question and answer session. I will now turn the conference over to Mr. Greenwood to close. Yes. Well, look, thank you very much, everyone, for attending our investor presentation this morning. I hope you are satisfied with the information that we're able to provide to you. And the analysts on the call will be talking with you this afternoon. And with David and I will be on the road Friday Monday visiting a number of institutions over those 2 days. So thanks very much again, and have a good day. That will conclude today's conference. Thank you for your participation. You may now disconnect.