Thank you for standing by, and welcome to the PGG Wrightson Limited full year results call. All participants are in a listen-only mode. There will be a presentation, followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Stephen Guerin, Chief Executive Officer. Please go ahead.
Thank you, Harmony Moreno. Good morning, and welcome to the PGG Wrightson results call for the financial year ended 30th of June, 2024. Beautiful day in Christchurch here, and thank you for your time this morning. I'm Stephen Guerin, the Chief Executive Officer of PGG Wrightson. It's my pleasure to today provide an overview of our financial results for the year ended 30th of June, 2024. With me on the call today, I have Peter Scott, our CFO, and Julian Daly, our General Manager of Corporate Affairs, and also the Company Secretary. Before I start today, I would like to acknowledge the immeasurable loss PGW experienced in April this year with the passing of Grant Edwards, the General Manager for Wool. Grant dedicated 40 years to the business, and his leadership will leave a lasting influence on the business.
As a stalwart of the wool, his passion for the industry was unwavering. Grant was highly regarded by his peers and chair of various industry bodies. Grant's strength was navigating industry politics to ensure outcomes were good for growers, the wool industry, and the PGW business. We also want to acknowledge the very sad passing of Victor Schicker, a valued member of our livestock team. Passed away in recent days, having given nearly 50 years of quality service to the business and our clients. Our thoughts are with Victor's family at this difficult time. During the call today, I will cover this year's financial results, our trading performance, key themes and initiatives, and some thoughts on the year ahead. There'll be time for Q&A at the end of the call.
Key measures of performance I will refer to as operating EBITDA, and I'll also refer to net profit after tax, also known as NPAT, for GAAP measure. Further details can be found in our financial statements. Annual results for the year ended 30th of June 2024 are: operating EBITDA of NZD 44.2 billion, down NZD 17 billion on the prior financial year. Net profit after tax, or NPAT, of NZD 3.1 billion, down NZD 14.5 billion on the prior financial year. Revenue of NZD 915.9 billion, down NZD 59.7 billion on the prior financial year. No FY2024 final dividend has been declared. Trading performance. The agricultural sector continues to navigate persistently challenging conditions, and this volatile environment is reflecting PGW's financial results. PGW's operating EBITDA is NZD 44.2 billion, is back on strong trading results of recent years.
This is largely a product of economic environment that has been felt across the sector. Not to say that PGW customers, we have farmer and grower customers do well. Our customers have faced difficult conditions over the past year, and consequently, this is reflected in our results. PGW has done well to continue to hold gross share in the markets in which we operate, but we have seen farmers and growers cutting back where they can in deferred discretionary spend. We've continued to support our customers with all their essential production requirements. The sector is in the grips of a period of austerity, and non-essential discretionary spend has been paused. Despite the challenging environment, our receivables have held up well, and we are pleased with the health of collections. Our risk margins have also largely remained steady across the business. Most of the agri sector has been impacted.
Some have been harder hit, the sheep farms experienced softer export demand and weaker commodity pricing, and the real estate market going through a particularly quiet period. First drop in PGW's revenues ... Sorry, significant decline in revenue from the prior comparative period represents the first drop in PGW's revenues since FY 2018. Retail and water business account for the majority of the revenue decline. It remains a carryover effect from the devastation caused by Cyclone Gabrielle last year, where areas of the North Island have not been replanted. Just a matter of market, of the market sentiment, Federated Farmers Farm Commodity Survey- Confidence Survey, released in July, recorded the second-lowest confidence levels quarterly, with 33% of farmers making a loss, and 27% making a profit, and 39% breaking even this year.
Our greatest concerns farmers were noting as financing costs, volatile commodity prices, regulatory compliance, and input costs. PGW's net profit, recorded net profit after tax of NZD 3.1 billion, noting this was negatively impacted by a one-off non-cash of NZD 900,000 through tax expense due to the change in legislation for tax depreciation on volunteer commercial buildings. The agricultural sector is cyclical. It has seen these ups and downs before and remain positive about the long-term prospects of the sector. Based upon current indications, the rural servicing market in New Zealand looks like it will remain subdued throughout the current calendar year. There are, however, some positive signals that the inflationary pressures easing and input costs stabilizing.
We're also optimistic about long-term deferred demand for sustainable, produced, safe, and trusted sources of food and fiber, and see New Zealand growers well placed to support this growth. Given the continued difficult trading conditions impacting the sector and wider economy, the board has not declared a final dividend for the year. Given the current operating environment, there's been increased focus from the PGW on cost control measures, monitoring of expenses such as travel, vehicles, and recruitment, among a few. The continued implementation of our company-wide business approval program, simplifying PGW's IT systems, continued through the year, is now in comprehensive testing phase. They're a significant investment, with both operating expenditure and capital expenditure requirements. The program will simplify our our technical IT environment and standardize business processes, providing greater efficiencies and better utilizations of our data. Go-live is expected to occur in FY2025.
During the year, our retail pricing and batch tracking for some products was implemented, and we're now in the first stages of realizing the implementation benefits. A comprehensive batch tracking service continues to be requested by our clients, and this is a chance for our retail stores to set themselves apart from our competitors in the area of traceability. Moving to the D365 platform, the majority of our systems will provide a more stable, efficient platform for our business. I'll now cover specifically on our two business groups, Retail and Water, and Agency. Firstly, the Retail and Water business. The Retail and Water business incorporates Rural Supplies, Fruitfed Supplies, water, and aggregate. Retail and Water's operating EBITDA was NZD 41 million, down NZD 13.1 million, or 24% on the prior year.
Revenue of NZD 733.6 billion was down NZD 51.7 million, or -7%. As previously noted, Retail and Water experienced a drop in demand for farmers and growers alike, addressing this being response to market conditions. Despite the more challenging market conditions, our retail business continued to consolidate market share in most categories. Even in the most difficult times, customers' feedback and market research indicate and support the view that PGW is on the right track, compares favorably to our competitors in regard to our professionalism, technical knowledge, and service. With budgets tight, we understand the heightened need for our customers to maximize value from this budget. In that context, their focus on providing the best technical advice and expertise, along with leading innovation, becomes even more important, and therefore ensuring trust, to reassure our customer proposition.
Over the course of the year, Retail and Water business refreshed its five-year strategy. The strategy focused on areas that will generate real growth and value, and set the business up to respond to the changing needs of our clients. Underpinning our strategy is the strength of our offering in core agronomy seed and the economic categories of seed and bulk fertilizer, alongside our sustainability credentials. The Rural Supplies, in the Rural Supplies business, we introduced our self-funded R&D model during the year. We currently have a strong footprint in horticultural R&D, and are moving to extend our capability into the rural services parts of our business, and a product-focused R&D. Initial R&D trials have been selected, and work has begun in this area.
We continue to invest in our store network, with the opening of new sites in Timaru for our Retail and Water businesses, together with the box store extension in Geraldine. These new developments provide improved working environments for the benefit of our people and our clients. These developments further demonstrate our commitment to support the farmers and growers throughout regional New Zealand. We also invested in upgrading the Waimate store, while more future upgrades are scheduled for our Winton, Invercargill, Ohakune, and Hastings stores. Our Fruitfed Supplies business. Even the trading conditions we experienced over recent times, our Fruitfed Supplies network has continued to set the standard for market. Business achieved its best performance in crop monitoring services, and our agritech category recorded the second highest sales year. The impacts of Cyclone Gabrielle continued to be felt.
A number of clients with business in Hastings lost large portions of their crops in 2023, and therefore less inputs were required in the new season. Some clients lost their entire season's crop last year, impacting on their cash flows and income into this season. Returns from some crops have been softer. The apple, avocado, and kiwifruit industries have experienced reduced returns, with prices obtained for some varieties at their lowest point experienced in several years. Drop in returns resulted in reduced spending in the past season for some product lines. Despite a good harvest, yields from wine growers were lower than this year's harvest, about 21% from last year's tonnage. The Water and Irrigation business. Economic pressures and strains being that irrigation systems operates. With less transaction activity, the water team took the opportunity to engage with clients and analyze opportunities.
Our service teams spent time fostering relationships with more through our on-time conversations, advising on irrigation orders and system operations. PGW Water continued to invest in specific in-field training for our technicians. This has seen increased client referrals with new and returning clients across the service branches. Agritrade Wholesale Business Division experienced a solid financial year. There's been a strong focus on improving our operations within the business through optimizing logistics function, encouraging bulk ordering, and inventory reduction to concentrate on preferred pipelines. There's been lower instances of facial eczema from livestock over the past season. There are fewer sales of our priority Time Capsule bolus treatment, which affected our Agritrade force. The second business unit, Agency. Our agency group incorporates the livestock, wool, and real estate businesses.
Operating inventory was NZD 12.3 billion, which was down NZD 3.8 billion or minus 23% from the prior year's strong result. Revenue was NZD 180.7 million, which was broadly in line with prior year's result, just down NZD 8.1 billion or minus 4%. Our livestock business was impacted by the tougher macroeconomic conditions, and elevated on-farm inflationary pressures and input costs led to subdued purchasing from farmers and a noticeable reduction in bull sales. Big prices were back significantly due to the export demand from China, coupled with an increase in supply from Australia. These factors combined to reduce the commission revenue. Livestock volumes were traded in the North Island, as spend surplus throughout much of the year led to farmers holding stock for longer.
Whereas cattle trading was robust in the South Island, but till those were up slightly compared to the prior fiscal year, as drier conditions led to increased stock turnover. Whilst pressure on sheep prices is anticipated to continue into the current financial year, there is the expectation we'll see robust trading across the major stock types as farmer confidence improves and the spring season arrives. We saw continued growth in our partnership with meat processors, with increased volumes and terms of negotiate across all of our key procurement arrangements. Go-Stock grazing programs, we continued to see positive demand. Go-Stock frees up capital for farmers, allowing them to invest in other areas of their businesses. Robust returns generated from Go-Stock, which continued to improve popularity with sheep, beef, dairy, and deer farmers.
Our deer velvet business delivered another good trading performance, with new contracts entered into with both local and international buyers. I visited key clients to South Korea and China by myself, the General Manager of Livestock. Our National Manager of Velvet strengthened relationships and identified opportunities for further growth. Our bidr database for buyers continues to show healthy development. This growth is driven by continued demand for online bidding and live streaming of cattle sales at Saleyards and on-farm auctions, and especially strong demand in the livestock index markets. We are regularly live streaming from 13 Saleyards around the country and a growing number of on-farm auctions, with over 950 auction streams throughout the year. Our bidr business strategy was also reviewed and refreshed over the course of the year.
New markets and user-friendly functionality will be explored within next year to underscore the benefits of bidr in bringing agricultural markets to extend our auction footprint further. The investment in our proprietary technology continues. The Blue Dog App has become indispensable for our livestock staff as a source for all technical resources and information. PGW's AgOnline online live listing app has seen increased classified livestock listings on our website. Our wool business. In the sad passing of Grant Edwards, our General Manager of Wool, two stalwarts of the wool industry also retired. Our North Island Wool Manager, Allan George, retired after 57 years, and South Island Wool Manager, Rob Cochrane, retired after 50 years. Both Alan and Rob spent their entire careers at PGW and its predecessor companies.
The depth of experience and expertise remains throughout the business, as demonstrated by the strong results of our wool business this year. These have delivered a degree of stability for wool growers, with some wool types approaching three-year highs, although significant scope for value remains. Merino wool made a steady competition for fine wool buyers with solid wool prices. Crossbred wool finished the season with some positive signs, as well-prepared crossbred faces commanded premiums. Most strong wool sold through, and it was possible for growers that was going to the start of the new season without large volumes of on stock and inventory. Our wool export subsidiary, Bloch & Behrens Wool New Zealand Limited, saw an increased interest with their flagship Wool Integrity New Zealand brand offering, including some well-known local brands coming on board.
The review of our leadership and operating structure of our PGW Wool business was initiated during the year. The leadership team has now been aligned with a view to implementing a professionally focused future strategy for our wool business. Our real estate business. This has 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. Economic climate was impacting farm and agricultural land prices, which was a mismatch between vendor and purchaser expectations. Macroeconomic conditions have also impacted the lifestyle market... has been keenly felt in the North Island, however, the South Island held up reasonably well, especially in the south of it, where there was growth compared to the prior year. Lifestyle block sales are slow, significantly post the pandemic.
Some exceptional quality listings have been being brought to market. Sales are heavily influenced by values achieved in large metropolitan areas. Sheep and beef property sales are slow due to low farm gate returns. The dairy sector had saw some momentum with increased interest in dairy properties listed following the uplift of the forecast farm gate milk price. Uncertainty is also evident in the horticultural sector, with fewer listings than expected. A share of the real estate markets held up despite the challenging conditions that have been felt across the industry. In real estate businesses, continuing to target organic growth, share growth through targeted recruitment, particularly in the lower North Island, where we've increased our footprint along the East Coast. Some strategic appointments, we're also expanding our residential offerings, particularly in Mid and South Canterbury.
First half of the current financial year are expected to remain challenging, particularly the rural market, where uncertainty remains in limited listing stocks. However, dairy sales are predicted to continue the steady growth in residential and lifestyle property markets, and also expected to see gradual upswing as interest rates ease consumer confidence returns. Turning to our people. We recognize that our people are our greatest asset, and are focused on driving a culture of excellence and safety, ensuring employees are supported, engaged, and able to perform at their best. We refreshed our people strategy to prioritize future workforce needs, and then attracting and retaining talent against the backdrop of evolving markets and societies. We maintained our commitment to developing our workforce through targeted investment and competency-based and technical training skills. Our core leadership program, to lead, has continued, and this year we've launched a new management skills training.
This is a series of standalone training modules that build capability in our key people processes. We have built our offering of courses that support career pathways in PGW and build really useful information. Health, safety, and well-being. In the past year, our commitment to enhancing our safety culture has continued to be a priority. We strengthened our foundations of workplace safety in partner with Impact Training to deliver a two-day program focused on health, safety, and well-being fundamentals. This program provides our employees with practical insights and skills to promote safer and healthier working environment. We also created our safety induction training program, Mental Fitness for Work, and online modules for, to address critical risk management as a priority, and significant progress is made in defining our safe practice expectations. We're working closely with the business to create a no-blame culture.
Feedback from this year's safety and wellbeing surveys shows real improvements in these areas. Our sustainability journey. FY2024 marks the first year that PGW will produce a standalone sustainability report, which will release alongside the annual report on PGW's website at the end of September. Reporting will support PGW's commitment to provide increased transparency with public sustainability disclosures. The sustainability report provides our stakeholders with disclosure on sustainability performance and activities over the past financial year, including our climate related activities. Climate related disclosure compliance after our New Zealand climate standards, issued by the External Reporting Board, including information on governance, strategy, risk management, metrics and targets. Sustainability is a key strategic pillar for our PGW strategy. FY2024, our sustainability strategy was refreshed to align with PGW's maturity approach.
The key initiatives include the formation of our group-level sustainability commitment, with representation across the business. Extended reporting and reduction of PGW's operational greenhouse gas emissions, and a commitment to transparency and action in regards to gender pay. Turning to governance and executive team changes. PGW board had a number of membership changes over the past year. Joo Hai Lee stepped down as chair and a member of the audit committee on the 4th of July 2023, and retired from the board on the 24th of October 2023. Served as a director since 31 of October 2017. U Kean Seng was appointed as acting chair on the 4th of July 2023. He stepped down from that role when Garry Moore was appointed chair of the board on the 16th of February 2024.
PGW executive team has three changes this year, following the sad passing of Grant Edwards, our General Manager of Wool. Rachel Shearer, our General Manager of People and Safety, took on the role of General Manager of Wool, acting, and Sarah Moyes became General Manager of People and Safety, acting. Moving to our balancing cash flow and debt. PGW recorded operating cash flows during the year of NZD 57.7 million, which was NZD 32.2 million higher than the prior year. Key drivers of the higher operating cash flows were reduced cash stock balance on the quarter of the June 2023, together with lower income tax payments. Capital expenditure of NZD 22.8 million, was NZD 5.7 million higher than the prior comparative year.
This spend included the continued investment of their IT business improvement program, and the acquisition of our co-owners' half share of the Frankton Saleyards of the Waikato. Our net interest period debt was NZD 59.2 billion, as at thirtieth of June, 2024, a reduction of NZD 6.1 million from the prior comparative period. PGW reviewed and extended its syndicated banking facilities during the year through to February 2026. These facilities provide extended tier and greater capital limits of our potential growth in our Go-Stock block. PGW paid a final dividend in FY 2023 year of NZD 7.8 billion on the third of October, 2023. No FY2024 dividends have been declared in the view of the continuing difficult trading conditions impacting the private sector and wider economy in New Zealand.
Thinking about the outlook, what we have, the rural services market in New Zealand remains relatively challenged in the near term, as expected to see moderate growth over the longer term. Farming prices remain relatively volatile and that depends on cautious approach from growers and farmers. Geopolitical changes are continuing to contribute to overall volatility. A slower than expected recovery from the key Chinese export market continues to dampen commodity prices. Economic pressures through elevated funding costs remain as interest rates continue to exert pressure on the agricultural sector. Interest rates and inflation relief is expected to come as global economic conditions stabilize. This should lead to more manageable debt services and predictable inflation. With this backdrop, PGW expects to continue subdued demand for agricultural imports and services over the short term, while producers face these challenges.
Over the coming months, we would anticipate these pressures to ease and increasing demand for rural imports and services as farmers and growers invest in their productive operations. MPI expects New Zealand's food and fiber export revenue to grow to a new high of around NZD 67 billion by June 2028, from circa NZD 55 billion recorded this year. New Zealand producers are celebrated for their ingenuity, as they develop innovative solutions to improve efficiencies. PGW's market-leading technical offering and retail network allow us to support our clients expanding their businesses to meet their export growth. Too soon to forecast trading performance for the year, and we're expecting to be in a better place to provide guidance in FY2025, following the start of an important trading period at our annual shareholder meeting in October 2024.
PGW's annual and sustainability reports will be available on the stock exchange website under our PGW ticker and on our website at the end of September. This concludes the 2024 financial results presentation, and I'll open the call to questions. Thank you very much for listening, and back to you, operator. We may begin the questions process.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two, and if you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Christian Bell, from Jarden. Please go ahead.
Yeah, good morning, team. Just a few questions from me. So just to start with, so EBIT margin was down 1.5 percentage points, while gross margin was actually flat. So what do we put that difference down to? Like, is it the result of operating leverage, or, or, and, or were there some added fixed costs during FY2024?
Peter here, Christian. Yeah, the margins were slightly reduced in the livestock area, but that depends on the mix of basically some of our product sales, like the velvet. Some of it's sold on principal, some of it's sold on commission rates. But the EBITDAR margins themselves, there's still some of the costs, while we're constraining them as much as possible, there are still some occupancy costs, such as insurance, rates, that sort of nature, that actually still has increased a bit more than what we would have, you know, with inflationary pressures, they've gone up higher than we would have liked. That's for sure.
Like price, like the likes of the insurance market, and back to that point around development, there was a lot more volume sold to the China market on a principal position, which impacts our overall livestock-
Right. Yeah.
Livestock, margins.
Does that-
The rest of the business units were actually pretty, pretty flat year-on-year.
Does the principal versus commission stuff come through in gross margin or EBITDAR margin only?
It comes, actually comes through, mainly in gross margins, but it will still filter balance down through to the EBITDA margin overall as well. Mostly to gross.
So, given... So sort of taking that into account, given gross margin was largely stable, can we basically assume that you've largely been able to pass on your own cost inflation, and hence an earnings recovery will, like, that's largely top-line driven from here?
I think, Christian, it's difficult in these environments to actually pass on all of the inflationary pressures onto our customers, and certainly we've been doing our best to control costs as much as we can. You know, you'll see in there that there's a lot of restrictions that we've-
... put in, travel, you know, recruitment, for example. All recruitment has to go through Stephen, as CEO for approval, that's replacements or even new ones. So, we've done our best actually not to pass on, you know, as best we can, not to pass on the inflationary pressures to customers, 'cause we realize that they are under a huge amount of pressure themselves with, with really high interest rates and, and tough commodity pricing.
Okay, so what, what's the kind of main—like, given you've sort of had some, you sort of hit the principal agency thing, and then you've got the other occupancy type costs, and it feels like some of those costs that you've been putting on restriction are kind of more at the sort of indirect level. Like, what, what's the kind of key lever that you've been able to pull to keep your gross margins stable?
It's the technical offering that we do. We give, you know, as a positive on the contrary, where our customers are under pressure, they will switch out the discretionary spend items. If you think about a farming operation, things like fencing, and we've seen some reduction in spend in the areas like of capital fertilizer, 'cause the last three years or so, they've spent a lot on capital fertilizer. You could go a couple years without spending so much in that area, but the key spend around permanent crops, feed crops, those sorts of things, they value the fact that PGW can provide good technical service, provide quality product, to achieve the maximum returns in a really tight market. So that's where we make the difference as far as our business is concerned.
Right, okay. So you are squeezed on a sort of cost input inflation side of things, but your technical offering has been able to... So I guess you're sort of, while you're sort of suffering on the cost of goods sold, you are able to offer higher value services, which are kind of offsetting some of those input costs?
Correct. If you're a farmer or an orchardist, and you can produce a better quality crop, you feed your animals longer, for example, in the South Island. It's been quite dry, so they've wanted to get crop in the ground and get it planted, and make sure they make themselves summer safe, so to speak. In a declining market, where you've got a lot less fruit available if you're a horticulturalist, you want that fruit to be of quality, because that's how you're gonna maximize your own cash flows back into the system. So, we can add some value on that process to our customers.
Cool, gotcha. And then, so the next question, so the second half performance was below PCP, so the momentum heading into FY2025 is actually probably more challenging than it was going into FY2024. So do you think FY2024, like, as much sort of guess at this, well, not guess, but, you know, sort of your sense of whether FY2024 is the trough or can things actually get worse from here?
My personal view and hope is that FY2024 is the trough, Christian.
Yeah.
Why do I say that? A couple of factors. Firstly, we had the carry over effect of cyclones that was impacting on planted areas last year and farmer cash flows. So, you know, we're seeing some replanting start to take place. Secondly, the harvest qualities that have come off the crops, generally speaking, whilst the volumes have been down, have actually been pretty good. I think if you look at Zespri are talking about 50 million or more trays in the marketplace, as one example. So that's gonna provide additional cash flow basically to our customers. We look at things like the grape crop, whilst it's back 20%-31% from a volume perspective, it's probably the best vintage we've experienced from a general perspective.
So that's gonna drive some premium returns for growers. You come back at the moment, we're seeing like as we speak some of the high prices from a beef market perspective, so that's driving demand, and we're seeing more cows being reared this year because they're seeing certainty in the marketplace. There's a wee bit of an uptick in sheep pricing although we're not in the spring window yet for that, but if you look at some of the commentary that's coming out of the international market spaces, particularly out of Europe and the United States, sheep pricing is starting to tick up a wee bit. We're seeing that, some of the prices going through the yards for our animals at the moment.
Then there's the more macro aspects of reduced, you know, interest rates, et cetera. That's been a real driver from farmers' perspective. So those sorts of things are, you know, we've had some improvement in the likes of dairy pricing, et cetera, as well, of course, it's a big, big driver in the sector.
Okay, so-
Okay.
No, no, no, sorry, I didn't mean to cut you off.
So, you know, if I look at what we're seeing at the moment, then you sort of look at those international market trends, that gives me some pointers. So a few things that are pointing in the right direction.
... Okay, so, I guess just to sort of summarize, if I could, attempt to, like, I guess, FY2024, a lot of sort of discretionary items were already put on hold, so they can't, I mean, I guess they can't be put on hold any further more than what they already are. And then there's some green shoots in terms of commodity prices for beef and sheep and beef. And then you've also got potentially some support coming from some replanting taking place post the cyclone from last year, and a decent harvest quality, which should also improve returns.
So you kinda got some, I guess, I guess the green shoots from better commodity prices, the replanting, and then hopefully interest rates start to come down as well, which I guess would help the confidence story.
Yeah. Correct. And, sorry, I've actually just reflected on my own items in there as well, Christian, which I would say is the government's, you know, the government, the change of government in November, which is quite late in our calendar year, you know, we've seen some quite activity, you know, in our sector as we've come into the new year, as the government sort of settled in, which has also helped to improve farmer sentiment, some things around slate management and waterway controls and so forth, and some other regulatory stuff that's impacted on the sector, which is coming through on some of the farmer sentiment surveys as well. So that, those sorts of things give confidence and certainty and, et cetera.
Okay, so I mean, this is my next question was sort of partially being answered by what we've just spoken about, but just trying to think about other factors that might support a better result in FY2025. Some of those things we just spoke about, in particular, sounds like, horticulture replanting, could be quite helpful. But also just wondering, I think you mentioned it in the call, but I slightly missed it, the investment spend on your IT system, are you expecting any cost out from that in FY2025?
Not in FY2025, Christian. The implementation timeline that we're working to is in the first quarter of the FY for the 2024 calendar year. So, so in our FY2025 financial year, so that's quite late. And of course, there'll be a period of transition from old system to new system, et cetera, and we'll go through the handover process of bedding that down over the course. So we will look for those sorts of efficiencies into the FY2026 year.
Okay, so, in FY2026, we can expect the sort of, to you to roll off, the costs of that implementation?
Yeah, Christian, it's Peter again. Some of those costs will start rolling off, you're right. But the other thing about that would be that, so that's the benefits of actually implementing it. But also you would expect that actually the elevated level of investment would actually start to come back a bit to a more normalized, normalized sort of amount.
So, are you able to give a sense of like, what kind of cost out we would, you might expect relative to what you're spending now, from FY2026?
Yeah, Christian, I would think that it's probably in the sort of probably NZD 3 million-NZD 4 million coming going forward.
Yeah. Yeah, and that's FY2026, that's not in FY2025, right? Just to be clear.
Yeah. Correct.
Correct.
Not, not 25.
Correct. We're targeting the first quarter of 2025 to FY calendar year to put it on, which will be, you know, that big downtime window and then into FY2026 will be those operational efficiencies that Peter's talking about in terms of the-
Yeah.
NZD 3-4 million dollar number.
Yeah, and Christian, that's really a combination of operational efficiencies, but also the fact that, as I mentioned before, you'd have a lower level of investment needed, you know, going forward, 'cause this is a major program, and, you know, with the change in accounting rules for software as a service, a lot more now is actually expense to operating expenses versus previously where a lot more would've, most of it would've been capitalized. So we've only got a portion capitalized and a portion going through OpEx at the moment.
Oh, yeah, yeah. So that, that's the part I was trying to understand, is how much-
Yeah.
How much cost out will actually be, you know, what's the cost out on the P&L, and
Yeah, that's what I was referring to, yeah.
Yeah, that's what we're referring to-
Yeah.
NZD 3 million-NZD 4 million.
Cool. Cool. And then just finally, so yeah, expectation was that you wouldn't pay a final dividend, and you didn't. So do we continue to assume that the policy remains under review? And then would you look to sort of update the market about that at the October ASM, along with potentially a guidance update as well?
We will look, certainly look to give the guidance update in October meeting, which is the board will continue to review... You know, we've been sort of a dividend stock, that's been a factor of the business over the last, certainly over the last few years. And we recognize that dividends are really important for our shareholders. But it's probably too early to comment on dividend as far as the October meeting, although the board might have a different view about that. But my view is that we really need to get through October, November, December are our biggest trading months of the business.
So whilst we'll have a sense of how things are, it's probably too early to talk about dividend in that window, you know, in terms of any specific level of specificity around, you know, number of cents or et cetera, this year you might expect, but probably more likely to do that in the February window.
Cool. Understood. Thank you.
Half-year results. Half-year results, yeah.
No worries. Thanks, guys.
Thank you. Once again-
Operators, any more questions?
Once again, if you do wish to ask a question, please press star one. We'll pause a moment for any final questions to register. Thank you. There are no further questions at this time. I'll now hand the conference back to Stephen for closing remarks.
Thank you for your time today, everyone, and, we will end the call. Hope you have a good day. Thank you.