[Foreign language] Good morning. Welcome, and great to see such a good turnout. I'm Garry Moore, Chair and Independent Director, and a member of the Audit Committee. I joined the board in July 2022, and became the Chair in February of this year, and I'd like to welcome you all to this annual shareholders' meeting. Today's meeting is a hybrid meeting, with some attending in person, while others via Computershare's online platform. Before we get started, I'm obliged to point out a few housekeeping matters, in the unlikely event of an emergency, where the wardens will direct you to the safe exits, which are the door you came in and this door here on my right. In the case of a seismic event, take cover, and the staff will advise you and assist you evacuate the building if necessary.
I'm told to tell you not to run, but you'll have to be pretty quick to keep up with me. Okay. We're recording this meeting, and it will be posted on our website later today. I confirm that we have a quorum, and accordingly declare the 2024 Annual Shareholders Meeting open. We will refer to PGG Wrightson Limited as PGW throughout this presentation today. The online meeting is being held via Computershare's online platform, which allows shareholders, proxies and guests to attend the meeting virtually. All attendees can watch this live webcast of the meeting and read the documents associated with the meeting. All shareholders attending, whether in person or online, can participate in the meeting and submit questions and cast votes.
If you're eligible to vote at the meeting, you will be able to cast your vote under the Vote tab, and once voting has opened, the resolution will allow votes to be cast. To vote, simply select your voting direction from the options shown on the screen, and when your vote is cast, a tick will appear. If you change your mind on that vote before voting closes, you can select "Change your vote." You can change your vote up until I declare the voting closed, which will be done at the end of the meeting. And in order to allow you enough time to vote, the voting is now open. The resolutions will be available on the Vote tab, and please submit your vote at any time. The PGW board had one change of membership during the year.
U Kean Seng relinquished the role of acting Chair, and I assumed that role as Chair on the 16th of February 2024. Before we begin the formal business of the meeting, I'd like to introduce the board who are attending our meeting today, and they are in the first row. In the center of the first row, Deputy Chair and Independent Director, Sarah Brown. To Sarah's right, Independent Director, Meng Foon, and this end, Director U Kean Seng. Welcome. I'd just like to note that Independent Director, Charlotte Severne, is an apology for today's meeting. Charlotte is in Wellington, convalescing from a routine medical procedure. Members of the executive team are here today, and they're seated alongside me, firstly, PGW's Chief Executive Officer, Stephen Guerin.
Along next to Stephen is the Chief Financial Officer, Peter Scott, and on his left is General Manager of Corporate Affairs, Julian Daly, who is also our company secretary.
Good morning.
I'd like to acknowledge members of the executive team who are in attendance in the front row here on my right. On the far right, we welcome General Manager of Retail and Water, Nick Berry. Hello, Nick. General Manager of People and Safety, Sarah Mears, and General Manager of Wool, Rachel Shearer. We have one apology from PGW's Livestock and Real Estate General Manager, Peter Newbold, who is unable to attend today. In August 2024, Rachel Shearer, who was General Manager of People and Safety, was appointed General Manager of Wool, and Sarah Mears, who was a Group Human Resources Manager, was appointed General Manager of People Safety, People and Safety. I'd like to acknowledge representatives from our share registrar, Computershare, at the door when you came in, and representatives from both BNZ and Westpac, who are members of our banking syndicate.
We're also joined by the New Zealand Shareholders Association CEO, Oliver Mander. I've taken my glasses off, Oliver. Oliver, I think that's you. Yeah, and I think you have Max Smith here, too, I think. Yeah. Hello. And I'd also like to welcome the Managing Director of Elders, Mr. Mark Allison, who's attending in person today. Our auditors, Ernst & Young, are in attendance, and I'd acknowledge that this is the last meeting of our audit partner, Bruce Loader, who is retiring from the partnership. And we wish to thank... I personally would like to thank you, Bruce, for your work over recent years. And before we start the formalities of the meeting, I'd like to recognize the loss that PGW has experienced in April this year with the passing of Grant Edwards.
Grant was General Manager of Wool, and Grant had dedicated forty years to the business, and his leadership will leave a lasting influence. As a stalwart of wool, his passion for the industry was unwavering, and he was highly regarded by his peers. Grant was a member and chair of various industry bodies, and his strength was navigating industry politics to ensure outcomes were good for growers, the wool industry, and of course, our business. And I'd also like to acknowledge the sad passing recently of Victor Schicker, a valued member of our livestock team, who passed away following a tragic accident at the Staveley Ice Rink in August. And Victor had given nearly 50 years of quality service to the business, and he was a company man, and he progressed through the ranks and became a specialist dairy rep.
As the Mid-Canterbury IHC Calf Scheme coordinator, Victor put in countless hours in canvassing, tagging, scanning, selling calves to help raise funds, hundreds of thousands of dollars of funds in Mid-Canterbury and for the IHC. As I said, we have an apology from Charlotte Severne, independent director, and I've noted the apology of Peter Newbold. I'd also like to note the apology of Mr. Alan Lai from Agria Singapore Limited. The company secretary has confirmed that the notice of meeting was sent on the seventeenth of September 2024, and all registered shareholders and other persons entitled to receive those notices. I confirm the minutes of the company's previous annual shareholder meeting, which was held here on the 25th of October 2023, were approved as a true and correct record at the board meeting on 27 November 2023.
The minutes of that meeting are posted on the shareholder information section of our website. The financial statements and the reports of the directors and auditors for the year ending 30 June 2024 are set out in the company's annual report. On the 17th of September 2024, the annual report was posted on PGW's website and on our NZX page, and a hard copy of the report has been sent to shareholders who had requested it. We also, at the time, released our sustainability report for the year ending 30 June 2024, which provides our stakeholders with a view of our sustainability performance and activities over the past financial year, including our climate-related disclosures. Reporting on sustainability is a crucial component of our commitment to transparency.
This is the third year that PGW has formally reported on sustainability as part of our annual reporting processes, and it is the first year of mandatory reporting under the New Zealand Climate-Related Disclosures Legislation. That comprehensive sustainability report is available on our website. It's the first year, first occasion for the release of a standalone sustainability report, and it goes alongside the annual report. I'd just like to note that we refer to both GAAP, or generally accepted accounting principles, and non-GAAP performance measures. We use the operating earnings before interest, tax, depreciation, and amortization, what we call our operating EBITDA, as a key measure of performance, and I encourage you to refer to the full accounts for details of how this translates to other GAAP measures.
I can confirm that 856 shareholders have appointed proxies for the purpose of this meeting, with respect to approximately 41 million shares. That's the opening formalities, and I'll now move to the general business of the meeting. I'd like to begin by commenting on the corporate governance matters before providing an overview of the performance results and sustainability highlights of the 2024 financial year, and then I'll hand over to our CEO, Stephen Guerin. And Stephen will provide a financial and operating overview of the individual business units, and he will also summarize how the business is trading for the current financial year to date, noting that it's very early into the new financial year.
I'll conclude the presentation by discussing our forecast guidance for the full year to 30 June 2025, which was released to the NZX yesterday afternoon. An opportunity to respond to questions will follow before we move to the formal business of resolutions that will be put to the meeting for voting today. As outlined in the notice of meeting, the business of the meeting comprises three ordinary resolutions, being the re-election of Dr Charlotte Severne as an independent director, the re-election of U Kean Seng as a director, and authorizing the board to determine our auditor's fees. Firstly, I'd like to briefly address the corporate governance issues that arose earlier this year, as I consider those events require some comment.
You may recall that Agria served a requisition notice in February, requesting that a special shareholders meeting be convened to consider resolutions seeking a number of board changes. That requisition followed several days of discussion between the independent directors and representatives of Agria. As we noted at the time, the independent directors were disappointed that the formal and public process was initiated, given that we did not consider that was in the best interests of PGW, nor PGW shareholders as a whole.... It is well understood that the agricultural sector has been through a difficult period of cycles, and many farmers and growers are facing challenges. Accordingly, the timing of that formal requisition to remove independent directors during that period was unfortunate and disruptive from a market perception perspective.
We saw this reflected in the media reporting on the matter and in our share price, as these events eroded confidence in the stability of PGW's governance and ownership. Now, PGW wishes to draw a line under that period and move forward positively, because in the present difficult trading environment, it is more important than ever that we remain unified and work collectively in the best interest of the company to tackle the difficulties before us. Accordingly, I do not consider that there is a great deal of benefit to be had in going into much detail today regarding the background to those discussions that took place at the time. However, I will say that when Agria withdrew the notice on 22nd of March, that was most welcome.
Together with the confirmation that Agria and the PGW board had determined that the current composition and the majority of membership on the board continued to have the appropriate balance of skills, expertise, and independence to lead the company in a positive way forward. I'd like now to comment on the financial and sustainability issues. It was a challenging year for the sector and for PGW. The operating revenue of NZD 916 million was down almost NZD 60 million, which is about 6% down on the prior year. The gross profit of NZD 235 million was down NZD 17 million or just shy of 7% on the prior year.
The operating EBITDA of NZD 44 million was down NZD 17 million or minus almost 28% on the prior year, and we gave updated guidance on two occasions during the year. Net profit after tax was NZD 3.1 million, down 14.5 million or 80% something on the prior year. But I would point out that it was positive when many in the sector faced negative returns over the same period. However, our net cash flow from operating activities of NZD 57.7 million was better by almost NZD 32 million or up 100% something on the previous year, which was very pleasing as we sought to manage cash flow as best we could. Sustainability highlights. We've had a 16% reduction in greenhouse gas emissions since full year 2021.
100% of all PGW electricity is supplied, is renewable, and supplied from renewable sources. Two-thirds of our vehicle fleet renewal options are hybrid, and we expect to see the proportion of hybrid vehicles increase as we renew leases over time. The agricultural sector continues to navigate challenging market conditions, and the cyclical volatility is reflected in PGW's financial results. This is largely a product of the economic environment and is being felt across the entire agricultural sector. We often say that PGW prospers when our farmers and growers do well. Our clients have faced difficult conditions over the past year, and consequently, this is shared in our results. PGW has done well to continue to maintain share in the markets in which it operates. However, we have seen farmers and growers cutting back where they can and deferring discretionary spending.
Another way of putting that is you can't spend what you haven't got. We continue to strive to support our clients with all their essential production requirements. Hence, the sector is in the grips of a period of austerity, where nonessential and discretionary spending have been paused in many cases. Despite the challenging environment, our receivables have held up well, and gross margins have largely remained steady across the business. While most of the agricultural sector has been impacted, some sectors have been very hard hit. Sheep farmers, in particular, experienced soft export demand and weaker commodity pricing, and the rural real estate market has gone through a particularly quiet period. No dividends were declared in full year 2024 as a result of these difficult trading conditions impacting the sector and the wider economy.
In that context, we sought a prudent approach to managing working cash flow. PGW's operating EBITDA of NZD 44.2 million was down NZD 17 million, as I said, in the prior year, and that was on the back of very strong results in the two previous years. Retail and Water, as I said, have experienced a drop in demand as farmers and growers reduced their spend due to the challenging economic conditions. Livestock was also impacted by subdued market conditions, including significantly lower sheep prices. It was a stable year for wool, and with solid pricing, although there are significant scope for much needed value growth in wool. The rural real estate market experienced particularly challenging conditions with a subdued market and farm sales significantly down on recent years.
Our operating expenditure investment in our company-wide business improvement program continued, and the 2024 result is largely a product of the economic environment, which was felt keenly across all of the agricultural sectors. As I said, revenue was down by almost $60 million. The 6% decline in revenue represent the first drop in PGW's revenue since the sale of the PGG Wrightson Seeds division in 2019. There's also a carryover effect of the devastation caused by Cyclone Gabrielle last year, with some areas in the Hawke's Bay, Bay of Plenty not yet replanted.
I mentioned the net profit of NZD 3.1 million was down NZD 14 million on full year 2023, and this included the negative impact of a one-off non-cash accounting treatment of NZD 0.9 million for deferred tax expense due to a change in the legislation for tax depreciation on long-life commercial buildings. And our margins overall were generally pretty much in line with the prior year. So that was the fun part, that I got to read all that out. Now I'll hand over to Stephen Guerin, our CEO. He might be able to cheer you up a little bit, and let him address each of the divisions and our prospects for the coming year. Thank you.
Thank you, Garry. [Foreign language] good morning, everyone, and I'm very pleased to be here with you today. You probably appreciate from my voice, I'm coming off the back of a bit of a flu, cold, I should say, so I'm on the road to recovery, so if I do have to pause, please, just forgive me for that. Right. PGW recorded operating cash flows during the year of NZD 57.7 million, which was NZD 32.2 million higher than the prior year. The key drivers for the higher operating cash flows were a reduced Go-Stock balance from what was recorded on the thirteenth of June of 2023, and lower income tax payments. Cash was also preserved, with no dividend declared in FY 2024. There has been an increased focus within PGW on cost control.
Capital expenditure of NZD 22.8 million was NZD 5.7 million higher than the prior comparative period. This spend included the continued investment in our IT systems business improvement program that Garry just touched on, and the acquisition of our co-owners' half share in the Franklin Sale Yards in Waikato. Our net interest bearing debt was NZD 59.2 million, as at 30 June 2024, a reduction of NZD 6.1 million from the prior comparative period. Excluding our Go-Stock receivables, our net interest-bearing debt was NZD 6.7 million as at 30 June. PGW renewed and extended its syndicated banking facilities during the year through to February 2026. These facilities provide an extended term and working capital limits and allowed for the potential growth of the Go-Stock book.
As of the 13th of June, PGW had 1,565 permanent and temporary employees and 334 casual and commission agents, totaling 1,899 people. We recognize that our people are our greatest asset, and we are focused on driving a culture of excellence and safety, ensuring employees are supported, engaged, and able to perform to their best. We refreshed our people and safety strategy to prioritize future workforce needs, aimed at attracting and retaining talent for the business. We retained our commitment to developing our workforce through targeted investment and competency-based and technical training skills. Our core leadership programs have continued, and this year, and we have launched our new management skills training program. In the past year, our commitment to enhancing our safety culture has continued to be a priority for the business.
To strengthen our foundation of workplace safety, we have partnered with IMPAC Training to deliver a training, a program focusing on health and safety and wellbeing fundamentals. We've also created safety induction programs, mental fitness at work, and online modules to address our critical control risk areas. Management of critical control risks is a priority, and significant progress has been made defining safe practice expectations within the business. While it's important for our people to understand the impact of the decisions they make, we have worked closely with the business to create a no-blame culture, and feedback from this year's Health and Safety and Wellbeing Survey shows real improvement in this area from our team. Turning to sustainability. Sustainability at PGW is a space that has matured significantly in recent times.
As a business, we have deliberately put in place structures to achieve progress across the environmental, social, and governance aspects of our operations. Climate change influences PGW through impacts on our clients and impacts on our day-to-day operations. We recognize that climate change will continue to impact the business and likely to intensify going forward. We'll continue to prepare for and manage these impacts on our business in order to support our clients and the wider agriculture and horticulture industries with climate change challenges.... PGW was pleased to release its first standalone sustainability report, as Garry has touched on this year, which includes reporting under the New Zealand Climate-Related Disclosures. Our report expands our business transparency and furthers our understanding of the climate-related risks and opportunities we face within the business.
Proactively addressing these risks and opportunities will enhance the resilience of our business, ensure we are prepared for a changing future. This also provides further transparency to our stakeholders and greater visibility for our climate-related aspects of our sustainability journey. Now, going to start to discuss a few technical highlights we've had within the business. Technical expertise and innovation are woven into the fabric of our business. Our customer-focused innovation strategic pillar focuses on identifying opportunities to offer innovative solutions through science and systems. Some of the technical highlight aspects achieved through the year are the following: We launched our SkyCount, our cutting-edge solution for efficient and accurate livestock monitoring, and I'll comment on the SkyCount program a little further in my presentation.
A summer R&D internship program was established, where university students undertake a research and perform field trials, providing us with beneficial information while the students learn about PGW and the agricultural sector, and we're continuing that program this year. Through partnering with A Lighter Touch, PGW supports the sector to move away from agricultural chemicals towards an agro-ecological approach, which provides sustainable crop production. In FY 2024, the first year of our Crowd Staff Source program, where staff pitch issues that clients are facing to the R&D team, and the team devises trial programs develops tangible solutions, was launched, and again, we're progressing with that program again this year. Turning to the performance of the two operating businesses, Retail and Water and Agency. The Retail and Water business incorporates Rural Supplies, Fruitfed Supplies, and Agritrade.
Retail and Water's operating EBITDA was NZD 41 million, down NZD 13.1 million on the prior year. Revenue was NZD 733.6 million, back NZD 51.7 million from the prior year. Our Retail and Water business, along with others, many others in the agricultural sector, had a challenging financial year and experienced a drop in demand, with farmers and growers alike reducing their spend levels to respond to market conditions. This is due to multiple influences impacting the markets, as such, including adverse weather events, aggressive competitive pricing, lower farm confidence levels, and economic uncertainty with interest rates, farm gate returns, inflationary pressures, and subdued commodity prices. Despite the more challenging market conditions, our retail business continued to consolidate market share in most categories.
Even in these difficult times, client feedback and the market research indicators we conduct support the view that PGW is on the right track and compares favorably in the market with regard to our professionalism, technical expertise, and service. With budgets so tight, we understand that the heightened need of our clients to optimize value from their spend. In that context, our focus on providing the best technical service and expertise, along with leading innovation, becomes even more important and differentiates our client proposition. Over the course of the year, Retail and Water business refreshed this five-year strategy, underpinning our strategy as a strength to our offering and core competency in agri, agronomy categories, along with the sustainability credentials. Our reduction in sheep and beef numbers has created a tighter market.
High farm input costs and lower sheep returns affected farmer profitability, which impacted our sales. We currently have a strong footprint in horticultural R&D, and we are moving to extend the capability of our rural servicing parts of our business with product-focused R&D. This initiative fits well with our strategy of delivering technical know-how and value add to our customers, who increasingly look to PGW to fulfill the role of facilitating leading innovation. Initial R&D trials have been selected and work has begun in this area. In January 2024, our Takaka store suffered significant damage as a result of a fire at a neighboring property. PGW is a key part of the town and local community, and we're pleased to have recently made progress, partially reopening the site and working from temporary premises with full remediation work underway, but awaiting council approval.
We continue to invest in our store network with the opening of our new Timaru Retail and Water stores, a new bulk store extension in Geraldine. These new developments provide improved working environments with a benefit for both our people and our clients. These developments further demonstrate our commitment to support farmers and growers throughout regional New Zealand. Even in the trading conditions we have experienced in recent times, our fruit and supplies network has continued to set the standard in the market. The business achieved its best performance in crop monitoring service and agronomy category, and recorded the second highest year of sales. The impacts of Cyclone Gabrielle continued to be felt. A number of our clients in the Gisborne and Hastings areas lost large proportions of their crops in 2023. Therefore, less inputs were required in this new season.
Some clients lost their entire year's crop last year, impacting their cash flows and income. Returns from some crops have been softer over the past year. The apple, avocado, and kiwifruit industries have experienced reduced returns. The drop in returns resulted in reduced spending in some product lines. Despite a good harvest, yields of wine growers were lower than the year's harvest, about 21% on last year's tonnage. Economic pressures constrained spend and irrigation systems upgrades. With less transactional activity in our water team, took the opportunity to engage with clients. Our service teams spent time fostering relationships through on-farm conversations around advising on irrigation audits. Agritrade, our wholesale business division, experienced a solid financial year. There has been a strong focus on improving our operations within the business through optimizing our logistical functions, encouraging bulk ordering, and inventory reduction concentrated upon our preferred product lines.
Due to the lower incidence of facial eczema in livestock over the past season, there are fewer sales of our proprietary Time Capsule bolus treatment, which impacted the Agritrade performance. Turning to the agency business. Excuse me. Our agency business incorporates the livestock, wool, and real estate businesses. Operating EBITDA was NZD 12.3 million and was down NZD 3.8 million on the prior year's strong result. Revenue was NZD 180.7 million, which is broadly in line with the prior year. Our livestock business was impacted by tougher macroeconomic conditions. Elevated inflationary pressures and input costs led to more conservative purchasing from farmers and a reduction in our bull sales. Sheep prices were back significantly due to the subdued export demand from China and the increased supply from Australia. Thank you, Mark. These factors combined to reduce commissions revenue.
Lower stock volumes were traded in the North Island, as feed surpluses throughout much of the year led to farmers holding stock for longer. Whereas cattle trading was robust in the South Island, where tallies were slightly up compared to the prior financial year, as drier conditions led to increased stock turnover. While pressure on sheep pricing is anticipated to continue for the current financial year, there is an expectation we'll see some robust trading across the major stock types as farmer confidence improves. We saw continued growth in our meat processor partnerships, with increased volumes and terms negotiated with our key procurement arrangements. I'd like to comment briefly on several areas of innovation within PGW leading the way in developing new options and solutions for the farming sector.
The first is our Go-Stock grazing program, which we've offered for several years now and which has continued to see positive demand. Go-Stock frees up capital for farmers, allowing them to invest in other areas of their business. Robust returns were generated from our Go-Stock program. It continues to prove to be popular with sheep, beef, and dairy farmers, and deer farmers, and I think we've just launched our first product to our pig clients as well, so. Another business offering is our bidr, our leading online platform for livestock trading. Our bidr database of buyers continued to show steady development. This growth is driven by continued demand on online bidding and live streaming of cattle sale yards and on-farm auctions, which especially strong demand with our GenX markets. Last year, I think we completed over a thousand online auctions.
We're regularly live streaming from 13 new sale yards and, alongside our on-farm auctions. Our bidr strategy is also reviewed and refreshed, over the course of the year. New markets and user functionality will be explored in the next year to underscore the benefits that bidr can bring to agricultural markets and extend our auction footprint further. Lastly, SkyCount. Another exciting, new offering we've seen had under development, and we've recently launched the National Fieldays at Mystery Creek. SkyCount is a cutting lead-edge solution for fast and accurate livestock auditing. Utilizing advanced drone technology and sophisticated AI, SkyCount offers precise livestock counts, while without impacting on-farm operations, enhancing efficiency, reducing workload for staff, and minimizing stress on animals whilst ensuring reliable audits, particularly for the corporate farming entities.
SkyCount integrates aerial imagery and AI software to conduct livestock audits at a new level of speed and accuracy and efficiency. This is an exciting new application for the technology, and PGW is proud to be leading in which we will believe over time will transform the manner in which livestock on-farm livestock counts and audits are undertaken. We've got a brief video clip for the SkyCount technology.
PGG Wrightson are developing SkyCount, an innovative way of conducting livestock audits using drones and AI. Traditionally, stock audits are done by counting animals through a gate, taking them off grazing and disrupting farm operations. Two staff count mobs back and forth until they agree on the tally. This approach, while accurate, takes a lot of time and effort. Using modern drone technology and AI, SkyCount accurately audits stock in the paddock. With pinpoint positioning, the drone flies itself along the programmed route and records the entirety of the paddock. The drone flies every paddock for stock to provide accurate tallies across the farm. We operate the drone at one hundred and twenty meters above the ground, allowing us to record most paddocks in a single pass and avoid any impact of the drone on livestock. SkyCount's key innovation is its ability to identify cattle and sheep specifically.
Our AI analyzes the footage, identifying and counting the cattle and sheep. The AI algorithm tracks each animal, and if the level of confidence is high enough, it is counted. Identifications with lower levels of confidence are verified by the operator to ensure 100% accuracy. SkyCount software combines information provided by the farmer with the tallies captured by the drone and AI to automatically create the audit report for the farmer. PGG Wrightson SkyCount easily conducts accurate audits without impacting livestock or farm operations, freeing both PGG Wrightson staff and farmers to get on with the important job of growing the country.
Thank you. The fact that with this story was picked up by some leading news outlets in New Zealand that don't normally take so much interest in the agricultural season, we might have something here. Moving on. Turning to our operational summary, I note that the season delivered a degree of stability for growers with prices in some wool types approaching three-year highs. Although significant scope for value growth for wool remains an industry priority. Merino wool beat steady competition from fine wool buyers with solid prices. Crossbred wool finished the season with some positive signs. Our wool exporting subsidiary, Bloch & Behrens Wool New Zealand Limited, saw increased interest in our flagship Wool Integrity New Zealand brand offering, including some well-known local brands coming on board. Excuse me.
A review of the leadership and operating structure of our PGG wool business was initiated during the year. The leadership team have now been aligned and with a view to implementing a refreshed and future-focused strategy for our wool business. It's been a particularly challenging year for the rural real estate market. Momentum in the market remains subdued, with farm sales significantly down on the prior year. The economic climate has impacted farm and agricultural land prices and produced a mismatch between vendor and purchaser expectations. Sheep and beef properties are seeing slower demand due to lower farm gate returns. The dairy sector saw some momentum, with increased interest in dairy properties listed following the uplift of the forecast of milk price payout around December last year. Macroeconomic conditions have also impacted the livestock market.
This has been keenly felt in the North Island. However, the South Island has held up reasonably well. Our share of the rural real estate market has held up despite the challenging conditions that have been felt across the country. Turning to the first quarter for FY 2024, the current financial year. The winter period has been generally milder, with good soil moisture levels across the country. Colder, wet snaps have plagued the provinces through September and into early October, with several spring storms blew through. In particular, Otago and Southland experienced flooding, having already received a period of sustained wet conditions leading up to these events. These conditions have required farmers to offload some stock to maintain pasture and assist in spring grass growth. There's been reports of widespread and significant land losses in these areas, with morale negatively impacted.
PGW is playing its part in supporting our clients through the various initiatives led by the Rural Support Trust and other industry bodies. Soil moisture levels have started to see some dry conditions in the eastern areas. However, in the North Island as we head into critical planting windows. We're getting to see some indications of green shoots of recovery in some sectors, which are coming through the activity in the business. We've seen solid trading over the first quarter of the financial year. I should note, we are now just entering the critical spring selling window for our retail business, and it remains early days. There's ongoing focus and efforts to control our costs. I'll now hand back to Garry to talk about the outlook.
Thank you, Stephen, for providing that overview. I'll now provide an update on the current outlook. Looking ahead, the rural servicing market in New Zealand remains relatively challenged. Geopolitical tensions are contributing to cautiousness in the markets and a slower-than-expected recovery of the New Zealand key export market. China continues to dampen commodity prices. Sheep farmers are facing challenging market conditions and soft returns, and sheep numbers are estimated to have fallen by about 4.3%, down to 23 million sheep or breeding ewes, and trading sheep stock numbers are also falling. The lamb processing season has got underway in recent days, with all eyes on the export returns, given the focus on the pre-Christmas processing for Northern Hemisphere markets for Christmas and for the Chinese New Year.
The difficulties faced in the sheep meat market were brought home in recent times with the announcement of the proposed job losses and closure of Alliance's Smithfield freezing works in Timaru. There are, however, a few positive indicators that I would note that suggest we are perhaps starting to see the start of a turnaround. Confidence has been returning to the dairy sector, with Fonterra providing the market with further confidence during September, lifting their forecast milk payout ranges. This confidence is leading to increased inquiry and activity in our real estate businesses for dairy and for dairy support properties in particular. Beef prices are strong, with export demand supporting a positive outlook. We're also seeing a greater number of calves being reared as farmers look to meet this demand.
Horticultural crops saw good quality yields in the past season, with kiwi fruit seeing some fifty million more trays than the previous year. While the grape, as Stephen mentioned, while the grape crop yields were back, they were of exceptional quality. These factors bode well for confidence returning to the horticultural sector as growers receive payment for their export markets. Given these mixed signals and the fact that we remain in the very, very early stages of the key spring growing season, we remain cautious about the financial year ahead. Currently, we are forecasting an operating EBITDA for the year to 30 June 2025 of around NZD 51 million. However, we will be in a better position to assess our forecast again after the spring trading period. We will now take questions in relation to our presentation from shareholders or their proxies from the room and then online.
And if you are present and wish to ask a question, please wait until the microphone is provided to you and state your name. So we're open for questions. Mr. Mander, sir.
Thank you, Garry. Oliver Mander from the New Zealand Shareholders Association. Look, I appreciate the comments you made around wanting to draw a line under the events, the corporate governance events of earlier in 2024. But I guess it certainly left a lasting impact around the wider market also. So I guess it may be a question for Agria, really, but what are Agria's future intentions as a shareholder of PGW? What is their exit strategy? And how can retail shareholders help them achieve that?
Thanks, Oliver. You're right; it is a question for Agria. However, they made a unilateral decision to call for a special meeting to remove three independent directors, and discussions took place over several days. That resolution was ultimately withdrawn, and that withdrawal was welcomed. We saw a lot of media attention to it, and as you note, it did impact the share price, and I would add it didn't go unnoticed by our banks, but we have, as far as the current governance set is concerned, drawn a line underneath it, and I think it would be only Agria that could give you an accurate answer. What are their intentions going forward? I think that is impossible for me to expand on. I do not know.
Appreciate that. Thank you.
Some more questions. There was a dead heat, but you- sir.
Ted Osborne.
Hello, Ted.
When you had the initial discussions in February, what did the Agria proposers -- what new technical information were they going to bring to the business, and what new aspects of rural business that they were going to bring to the business that they weren't prepared to give was through their original directorship? In other words, what good were they going to do to the company's business?
Thank you for the question. Same answer for Mr. Mander: I don't know. I don't know what good it was going to do. Other than, they appeared to be handpicked for some purpose, and replacing three very competent, capable people with a lot of knowledge of the business and commerce generally. That question is really a question for them. The only thing I would add is that, were a similar event to happen again, I think they would be hard pushed to find in New Zealand, competent, reputable, independent directors willing to accept that nomination. Max?
Max, that's my name. Garry, I'm a member of the New Zealand Shareholders Association, but just a member at this stage. With regards to Agria Corporation, it might be advisable or favorable to take on board the fact that this company is an iconic New Zealand company, and if they took on board the fact that many people who support it in the farming community would do so in under its current situation and its current management, and benefit from that accordingly, and not perhaps try to make too much in the way of changes. But anyway, my question, however, goes on from that, and that is this: in my traveling around the countryside, I noticed that the real estate business and the farm sales business seems to be dominated by the one dreaded Bayleys.
What has PGG Wrightson got as a plan to try and wrest that percentage of the market away from them and back to PGW?
... Okay. Firstly, Max, thank you for your observation and then the question, and then I'm sure that Mr. Guerin has an excellent response to that.
Thank you, Max. If Peter Newbold was here, I probably would have turned the question over to him, because he is the real estate expert. But notwithstanding that, couple of things from PGW's perspective, perception versus reality. We do. Real estate is one of those markets in New Zealand, where there's actually very good transparency of data from the Real Estate Institute. And our market shares from a real estate perspective are actually higher than what Bayleys are. Our. We've just completed some customer feedback. We do it on an annual basis, independently run, we're fully scientific, et cetera. And that underpins, sorry, gives us exactly the same results, that we are doing better in that space in terms of delivery of results for our customers.
Probably the message out of that, in terms of what you're saying, is that we probably could do a better job telling our story and getting a few more signs out there. But in terms of actual transactions, we're actually doing a good job on that space. One of the initiatives that we are doing from a business perspective, there's two initiatives I should say. Firstly, in some of our locations, our real estate locations, we've had just for historical reasons, we've had them separated from our core businesses. We're bringing them back in, under the umbrella of the core business. That allows us close collaboration between the teams. Those locations are in the minority, but they do exist.
And we have also introduced a staff referral scheme across the entire organization to help, you know, where they see prospects from a purchaser and a potential seller perspective as well. So that's leading to some leads. So that's just been launched, about two months ago. So yeah, hope that answers your question, but I do take your message, so probably we're gonna do a better job telling our story. So thank you.
Thank you.
Okay. Okay, how are we going? Some more questions. Well, suits me. Gives us a longer period of time for morning tea.
Garry, just to confirm, there's no online questions.
Oh, thank you, Julian. No online questions. So thank you, online people. So what happens next here? We've come to the formal part of the business, where there are some ordinary resolutions in relation to the election of two directors and authorizing the board of directors to fix the remuneration of our auditors. The resolutions and the accompanying notes are set out in the notice of meeting, and as usual, we offered shareholders the option to cast their vote for the meeting via email, mail, online or in person here today. The proposed resolutions will be determined by a poll that will be undertaken by our share registrar, Computershare. The first resolution. The first resolution relates to the re-election of Dr. Charlotte Severne as an independent director.
Charlotte's biographical notes are set out in the notice of meeting, and Charlotte joined the PGW board on the 18th of June, 2021 , and being eligible, offers herself for re-election. And as I noted at the outset of the meeting, unfortunately, Charlotte can't be with us today. However, she has sent me the following note: . Sorry, I can't be there with you today, but I wanted to say a few words. I'm very honored to be standing again for PGG Wrightson. The company has managed to perform well with challenging headwinds in the ag sector. I'm excited by the innovative products and opportunities that are being progressed across multiple business units in the organization.
I believe I have more to contribute to this wonderful company and its people, and thank you for your support, and hope I get to represent you all again for another term, Charlotte. The company's directors wish to note the specific expertise and experience that Charlotte brings to the board, as noted in her biographical notes, and we recommend that shareholders vote in favor of Charlotte's re-election. Resolution two. The second resolution relates to the re-election of U Kean Seng as a director. U Kean's biographical notes are also set out in the notice of meeting. He is a current director and joined the PGW board on the 4th of December, 2012 , and U Kean Seng, being eligible, offers himself for re-election.
The company's directors wish to note the specific expertise and experience that U Kean Seng brings to the board, as noted in his notes, and recommends that shareholders vote in favor of his re-election. Sorry, I think we have a question. Sorry, I've got a bit of a problem with my glasses. Who was first there? David. Yeah. Yes. Yep, yep, go ahead.
Yes. Is that right? David Tennyson, shareholder. Now, I noted on page 102 of the annual report, there's been a slight change in Mr. U Kean Seng's position. He was Agria Corporation. He was head of corporate legal affairs at Agria Corporation up until December 2023, and now presumably he isn't. So I guess my question is, how does this change in status going to affect how Mr. Seng conducts his affairs as a director of PGW? Because clearly Agria is a cornerstone shareholder, and clearly in the past, Mr. Seng has been a direct link to that company. So I'm just interested to know, how is that gonna work in the future? Is he still going to be? Well, as an example, I presume that he's not going to be in contact with Mr. Lai as often as before, for instance. So I'm just wondering how this is gonna affect his directorship of PGW.
Okay. Thank you for the question. I can't comment on your assumption or presumption, but I will invite Kean Seng to respond shortly. What I would say is, under the NZ Stock Exchange code of governance, the fact that he has worked for Agria in the period immediately prior to that change of status, he is still non-independent. And also, the fact that his tenure has gone beyond 12 years, that's also a condition of independence, and he would be deemed non-independent for that as well. But, if he wishes, I would invite him to respond on the second part of your question, which is: How often will he be speaking with Mr. Lai? I think was the question, put a different way.
Thank you. Thank you for that question. The fact that I think what Garry has said about the classification of independence or non-independence, I think that you know, that is correct. Because of my previous association with Agria, that I would not be considered as an independent director. But as someone that have represented Agria and also sitting on the board of PGW for that number of years, I have you know very good experience in terms of knowledge to be able to contribute as a director. I also like to take this opportunity to clarify the NZSA you know Shareholders Association's letter, I think, to the shareholders, that I remain as a representative of Agria. That, that, that is not correct.
I have retired from my position as a general counsel for Agria since December 2023 . So the... You know, I will continue to contribute as a director. I think the fact that I have you know experience and knowledge you know of Agria, as well as the company's business, I think I could play a very you know positive role in contributing and bridging the gap you know the independent directors who are not familiar with Agria and have no direct relationship with Agria, that I can you know be a very good bridge. And as to your question, how often do I remain contact with Agria? I think the chairman of Agria remains a very good friend.
He's been a personal friend of mine since university, so I think, you know, that friendship, I think, you know, can be a very good and positive, you know, factor, helping the board and the company to stay connected with Agria and Alan Lai. Thank you.
Thank you for that thoughtful response, U Kean Seng. Oliver?
Absolutely. I'd just like to thank Mr. Guerin for that. It's good to hear. I know people have mixed views about Agria being involved in the company. I don't want to get into that at all, but the fact is, they are a very important cornerstone shareholder. I think it's very important that the board keeps in touch with them, keeps that communication channel open, and I'm pleased to hear that it sounds as though, through Mr. U Kean Seng, we'll be able to do that. So that's good news. Thank you.
This time.
Thank you. And look, thanks to U Kean Seng for clarifying the situation around the relationship with Agria. That is helpful. Just one specific question in relation to that first, and then I've got another question also. Was the change in U Kean Seng status in relation to Agria in direct response to the judgment calls made in relation to the corporate governance challenge that was received earlier this year? So that's the first part of the question. Look, I guess the second part of that, there is still some association there, that is very clear. Given the poor judgment made by Agria in terms of chasing or the actions it took earlier in the year. At that point, what value does U Kean Seng as a director in his own right in terms of those corporate governance issues?
What does that say about the judgment that he displayed as a director at that time?
Would you like to respond to U Kean Seng? We'll get you a microphone. The first part of the question was the change in status a consequence of what was happening as regards to requisition? And the second part of the question was what does that mean now in terms of the skill set you bring to the board that might not otherwise already be there?
I think, as I have said, previously, that I do have a you know very close relationship with Agria and Alan Lai. But the fact that I'm not you know a member of the executive team of Agria, I was obviously not a party to that decision of Agria in February. But having that friendship and relationship with Alan and Agria, I think as the Chairman, Bull you know can testify, I did play a very proactive role in terms of helping the party to resolve the impasse. And I think that you know the outcome of Agria withdrawing is resolution, I think speak for itself. And I think that continue to you know be a you know a very good testimony of my ability to bridge the gap you know between shareholders and you know the board.
Thank you.
Thank you.
Sorry, just the second part of that question, Kean Seng, in terms of if that relationship is no longer there, can you expand on the value that you add to the board in your own right?
Can you repeat that again?
Just in the absence of any ongoing relationship with or formal relationship with Agria, can you expand on the value that you add to the board in your own right?
Oh, in terms of value and ability to contribute on the, you know, at the board level, my knowledge about the company and the business and my relationship with the executive team, you know, it is a very good factor in my ability to contribute. And obviously, apart from my relationship to understand the aspiration of major shareholders, that also is helpful. Thank you.
Thank you for both the questions and the answers. I would just add a little bit of color to that interchange. We'd acknowledge that Agria are an important shareholder, you know, over 44% shareholder, which does give Agria the legitimate right to appoint under the current structure of five directors, you know, I would say two legitimate appointments. And I think to argue otherwise would be just because of what went on, to argue otherwise would be a little churlish. So, I share your inquisitive question. I'm not too sure of the relationship. I think U Kean Seng has answered it honestly. He's told you of his friendship with Alan Lai. I'm just not sure what Mr. Lai will be thinking in terms of official representatives of Agria. If that...
I think that made sense. May we have some more questions? I've got one more thing to do, haven't I? Yeah. Okay. Right. The third resolution. The third resolution is to authorize the board of directors of the company to fix the auditor's remuneration for the financial year for the purposes of Section 207S of the Companies Act 1993. As is usual with audit fees, it is impractical to fix the remuneration at the beginning of the year. Accordingly, the board of directors are seeking authority from the shareholders of the company to fix the audit fees at the appropriate time. So thank you for that. I'll now move that resolutions one, two, and three are set out in the notice of meeting by way of the three separate motions. I'll move them as ordinary resolutions.
A poll will be conducted in respect of the resolutions. For those who have not cast their votes already, please do so now by clicking on the Vote tab on the right side of your screen. And for those present who have not yet voted, please complete your paper and pass them. Or no, Computershare will come and collect them. We'll collect your voting papers in the room, or you may hand it to the representative at the registry table by the door where you entered. That concludes our discussion on the items of business, and I'll now close the online voting system. No, when does that close, Julian? Does that close now?
You open it more for any more questions.
Oh, it's open for any more questions, and I'm happy to address any further questions from the floor, while we're waiting for that to happen. So I will now declare the voting closed.
Sorry, we've got one from-
Oh, and invite questions. So,
We'll leave five-
...Leave it open for a little longer?
Yeah, yeah.
Okay, the voting is reopened. But hurry up and vote if you haven't.
David's got a question.
David?
Yes, thank you. I had a question. I wasn't sure whether to ask it at the end or during the result discussion time, but basically, it's been a fairly tough year for the company, as I think everyone knows. And last year, I asked a sort of a bit of a pie-in-the-sky question about banking covenants and things, and yeah, I wasn't given a particularly clear answer, but I thought I'd have another go. And I'm thinking around 2025 Now, I know these banking covenants are something normally between the company and their bankers, but who I notice they believe there are representatives here. But, and they may wish to comment as well.
But one of the areas that I believe is looked at is the ability of the company's cash flows to cover their interest payments, in effect. And although you haven't released these statistics, I can make an educated guess that with your revised EBITDA forecasts for 2025 , I'm of the opinion that it is likely that any surplus cashflow will probably be going to retire more debt. And even at this early stage, you'd probably be at the situation where you can tell shareholders news they don't really want to hear, and that is you've canceled the final dividend for 2024 . And I understand the reason for that. I think you're probably also at this stage you have to cancel the interim dividend for 2025 as well.
I know it's early in the year, but I can't see any way out of that. So rather than giving shareholders false hope, I'm wondering whether you could just clarify that that is in fact the case. Thank you.
Delighted to. Before I hand over to the CFO, Peter Scott, I'll make some comments on what your observation means. The first thing I would say is that we have an excellent relationship with our banking syndicate. You will note that we've actually, during a period of hard times, had an extension of our credit terms because of our desire to grow the Go-Stock product, which, I'm reluctant to call it financing, but it's a product that needs financing. And it, it's a good part of the business and an integral part of the business, and we managed our cashflow very, very carefully during the year. There are many components of dividend policy.
You're right, cash flow is a key consideration, as is CapEx and OpEx, and we're going through a period of a major IT upgrade that is eye-watering in its costs. While that was happening, in the face of the downturn last year and rising interest rates, I might add, at the same time, it was prudent to curtail dividends. Now, the other thing you mentioned about EBITDA: the bank doesn't use the EBITDA that we use. The bank uses a thing called Frozen GAAP, which is slightly different. It takes off lease payments as well, and as a denominator, that can be quite a constraint. But we haven't breached any banking covenants. One thing that has changed, however, is that the banking syndicate has taken more of a seasonal approach to some of those covenants.
Not all of them, some of them. Which is sensible, because we're heading into periods of time. I think it peaks near December, December, January. You know, having a static figure as a covenant is crazy when, you know, our debt can go three times higher in the peak of the season. And at the end of June, I think if you took off the Go-Stock , you said the number. I think we only had about NZD 6 million of debt at the end of June. And we're well within those. It's not appropriate to reveal what those covenants are because they're commercially sensitive, and some of our competition would love to know how much more money we've got in the tin. And as regards dividends, that's a decision for the board.
Paying dividends is easy when you've got net profit after tax. You see, we didn't have any. That was what we were expecting to see, and we managed it sensibly, prudently, and we will act in the best interest of all shareholders to try and restore dividends as and when it's prudent and appropriate to do so. Anything to add, Mr. CFO?
Oh, probably just two things, actually.
Sure.
You've covered it well, Garry, the answer. I guess just to clarify, so we've got normal covenant ratios, basically leverage ratios, which are based on our debt over our EBITDA, which you talked about, Garry, but the analysis that you've done, David, is really good because the other one you're talking about is our fixed cost coverage. Now, the only comment I would make there is that we have controlled our working capital very well, so our inventory, for example, is lower. Our EBITDA, so the denominator for 2025 is going from forty-four, and I know that's not Frozen GAAP, but if you appreciate, it's going from forty-four to fifty-one. So the denominator is certainly helping us a lot there. It will help us through 2025. And the other point is that interest rates, if the OCR continues to drop, well, should actually reduce as well. So our cost, in other words, our numerator, should actually come down, could come down as well. So I think for…
We've probably been through the most difficult part, and now we're actually we should be looking forward to meeting those covenants in a, you know, in you know, reasonably comfortable method, actually, so.
Okay. Well, first of all, I'm very pleased to hear that the banking syndicate appreciates the seasonal nature of the business, because I think that's something I wasn't fully aware of, so that's good to hear. Because, although the banking syndicate's obviously keen to support the company, I don't think they're keen to be long-term owners of the company if they have to turn the screws and say, "Well, I'm sorry, boys, we're gonna take over." So, I'm pleased to hear this relationship's good, and long may it continue. But, I noticed you didn't, you sort of talked around the dividend question.
I know there are a lot of balls in the air, but I still think you're going to struggle to pay the next dividend, so I just like to warn shareholders not to get too enthusiastic about the dividend returning immediately. That's all. I don't want to pump expectations that are unrealistic. I guess that's about all I've got to say on that, so thank you.
Thank you for the observation. Sir, did you have another question? No. No. How are the counters going?
Don't close the vote.
Oh. You can close the meeting anyway, and then they'll Computershare will just complete the vote and inform me afterwards. That's what we usually do. How they do it. Right. So how will they know it's closed? They will just close the vote. Right. And do the counters. Okay, sorry, I'm not too familiar with this high-tech means of voting. In the old days, it was just that. Okay, I don't. As a courtesy, Mark, would you like a question? You probably would have asked it already.
No, I think the dividend question was one on my mind.
Mm.
But I guess for, as a shareholder, our view is that clearly understand the situation in terms of paying dividends out of debt. This is something that,
Yeah
We don't endorse at all.
Mm-hmm.
So our thinking is more around capital growth for the next period until we get in a position where there can be a dividend pay as well. And so we look at it, I mean, we're a hundred and eighty-five-year-old agricultural company. We understand the cycles, and so we're quite patiently looking forward to stability.
Mm
... sorting out the internal issues around the IT system and then moving forward in a better operating environment. So no question, sorry, Garry, but thank you.
No, well, thank you. It was a good prompt, actually, because I omitted something I should have said, because over the last couple of years or prior, as shareholders well know, dividends were extremely high, to the tune of almost all of the net profit after tax was paid out. And I recall two meetings ago, there was a question from the floor. A gentleman, shareholder, wanted to know: "Why are you paying all these dividends? Well, why don't you retain some of these earnings and grow the company?" Now, it might not be much a surprise to the more analytical people here, but those dividends paid out over that period equated approximately equal to the escalation in debt. So personally, although I speak for the board, I'll tell you personally, I don't think it's wise to borrow to pay dividends.
As we manage the cash flow, as we retain earnings, as we complete this IT transition, and as we have some clip-on components to the business that we're looking at, whatever the CapEx requirements of that are, we should have left over something that we can call a dividend. We look forward to the day of perhaps pleasantly surprising you, David. I'm going to close the meeting now. I think that's fair. In lieu of the lack of dividends, there's some good sausage rolls out there. You can have two instead of one. Thank you for your attendance. I know it's early and cold out there, and we do appreciate the support we get from our shareholder community and the professionals in the room. So thank you for coming.