Good day, and thank you for standing by. Welcome to the PGG Wrightson half-year result announcement public conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to our speaker today, Stephen Guerin. Thank you. Please go ahead.
Thank you, Alberta. [Non-English content ] Good morning, and welcome to PGG Wrightson's result briefing for the six months to 31 December 2021. I'm Stephen Guerin, the Chief Executive Officer for PGG Wrightson, and I'm pleased to provide you our overview of our interim results for the 2022 financial year. Joining me on the call are Peter Scott, our CFO, and Julian Daly, our General Manager of Corporate Affairs, who's also our company secretary. I will summarize the financial results, our trading performance, key themes and initiatives for the period, and I will discuss some thoughts on the year ahead. Then there will be time for some questions. During my presentation, I will refer predominantly to operating EBITDA, which is a non-GAAP measure that allows us to best describe the business operations.
I will refer also to our bottom line of net profit after tax, the formal GAAP measure. There are key results for the period I'll note are revenue of NZD 552.4 million, up NZD 53 million or 11%. Operating EBITDA of NZD 47.4 million, up NZD 7.8 million or 20%. Net profit after tax pre-impact of NZD 22.5 million, up NZD 5.5 million or 32%. Total shareholders' returns of +55% for the period. Increased fully imputed interim dividend of NZD 0.14 this year, an increase of NZD 0.02 this year compared to the comparative period. Record first half year result, a strong, very strong performance from our Retail and Real Estate businesses. A strong balance sheet that continues to support the growth ambitions of the business and renewed and extended bank facilities.
Increased operating EBITDA guidance for the full year of NZD 62 million. These record results of PGW are extremely pleasing and reflects the excellent performance of the business over the period. Our impressive results are a testament to the incredible efforts of our team in what has been a very disruptive and challenging half year. During the period, we launched our strategy reset and outlined our PGW group strategic priorities that will direct our focus, differentiate our offering, and strengthen our position as a market leader in our sector. I'll now turn to the business unit operating results starting with the Retail and Water business. The first six months of the 2022 financial year have resulted in the strongest first half trading for Retail and Water on record. Our businesses has traded well ahead of last year, which included new highs for some months.
Operating EBITDA for the Retail and Water group was NZD 43.7 million, up NZD 10.1 million or 30%. Revenue was NZD 469 million, up NZD 55.6 million or 13% on the strong performance of the first half last year. Commodity prices in general and across the sector for New Zealand primary exports remain positive. While a degree of volatility in international markets continues with disrupted supply chains, inflationary pressures and the global pandemic, our business is diversified and continues to adapt to our client and market needs. Our focus remains on value added to our clients' businesses by supplying products and services and providing the best technical advice. Our market shares remain strong in key market segments, and we continue to pursue targeted growth.
We remain focused on our clients and our strong culture, and our technical expertise is recognized by our clients as a key point of difference. We continuously continue to see new clients coming into stores or contacting our rep force and asking them to come on-farm or orchard. As a business, PGW has responded to the current market dynamics and actively seeking to mitigate supply chain risks by keeping our stakeholders informed. We've seen clients buying products earlier than usual to either lock in lower prices or secure product availability. The costs of moving products through the supply chain are increasing due to inflated freight charges. To ease the supply chain risks, we have been sourcing products earlier and carrying more inventory, as well as working closely with our suppliers to agree on product forecasts and availability.
Our Rural Supplies business results were even better than that of the strong comparative period for both revenue and operating EBITDA. We've had growth in both categories, in most categories, especially the key agronomy areas. Market share gains continue and the team enjoys welcoming the new clients in our stores. Some of the increased growth is attributed to sales being brought forward due to the uncertainty of supply, price increases, and COVID-19 pandemic uncertainty. Farmers have improved by making sure they have the product when they need it. While all sectors are enjoying increased returns, some have been softer due to increased product inputs. The first six months trading results for our Fruitfed Supplies business has seen continued strong growth. Favorable climatic conditions in the key spring period have resulted in most crops in good health with positive yields expected.
These market and environmental factors continue to attract investment and development in the horticultural industry. As the developments come into production, we're seeing increased demand for the products and technical services we provide to the sector. Continued technical training of our water sales and service teams throughout the winter of 2021 is delivering results with increased client retention and referrals. This technical training is a continued focus of the rural water business as we see irrigation componentry becoming more advanced. It is anticipated that we'll continue to see supply chain delays in sourcing some water and irrigation componentry during the next 18-24 months. Our Agritrade wholesale business division has had a good first six months, with key products and categories all performing well.
This is particularly pleasing given the supply chain disruptions we've encountered throughout 2021 and which are continuing into 2022. The Agritrade team continues to work diligently to get the required products into New Zealand and into the rural network in a timely manner. While this has usually meant planning our requirements much further in advance and landing products earlier, it has also given us some opportunities as we've seen other products in short supply or unavailable on the New Zealand market. Turning to our Agency business. Our Agency business incorporates the Livestock, Wool, and Real Estate businesses.
Trading for our agency group, which is weighed towards the second half of the financial year, delivered an operating EBITDA of NZD 7.4 million for the first six months, which is a reduction of NZD 1.9 million compared to the same prior period. Revenue was NZD 82.2 million, just slightly lower than the prior comparative period. For the Livestock business, the first six months activity has been impacted by weather conditions in the North Island. COVID-19 restrictions include sales being closed during alert level four. There was a small decline in sheep and cattle numbers through, although stock values were strong during the period. We have an impressive cohort of young auctioneers progressing through the ranks. Of the eight contestants vying for the 10th annual Heartland Bank Young Auctioneers Competition, four were representing PGW.
PGW secures the quinella, taking our first and second places, and this is pleasing to see such a talented group of auctioneers coming through our ranks. We're continuing to reinvest in the business through upgrades to our sale yard network and investment in new technologies to assist our agents better service their clients. Our Velvet business has seen some shipping challenges in the second quarter, but overall strong velvet pricing and improvement in venison prices bodes well for the period ahead. Two new GO-STOCK products were launched in recent months to meet the demands of our clients. Our new GO- BEEF PRIME and our GO- DAIRY MAX & LIGHT products are proving popular and contribute to the overall GO-STOCK balance increase by over NZD 5 million compared to the comparative period.
A lot of clients use the product year on year, which is welcome sign that GO-STOCK is seen as, by many as an integral part of their farming operations. bidr, our online sales platform, hybrid auctions are seeing growing usage with dairy herd dispersals and deer sales, in addition to the stud and ram sales. Since the launch of the sale yard live streaming during the first six months, bidr user base has grown by 30%, which is mainly due to commercial buyers that see the value of nationwide reach. Introduction of picks and run outs, a common way of selling livestock at sale yards and at on-farm auctions, means that the functionality that bidr did not previously offer are now available in the online platform.
In addition, an insurance offering has been added so that clients requiring insurance for higher value all animals can access insurance cover at their point of purchase. The first half of the financial year for real estate saw substantial growth in rural sales, especially during the second quarter. It was the best result for rural sales we've seen in many years, which has been significant in heartland rural areas. Our market share increased throughout the country, especially in the South Island, with some significant results. There has been an increase in land sales greater than NZD 10 million within all sectors, which has not been evident in the marketplace for some time. We've seen good interest in all sectors from respective buyers, and sheep and beef properties continue to be in high demand.
Our buyer pool in all sectors is more diverse than previous years, which indicates positive interest in the rural sector. Our Lifestyle and Residential sales are on par with prior period and prior comparative period, which is encouraging, especially given the shortage of listings and the competitive environment we're operating in. We experienced good growth in key provincial locations throughout both islands, which is a testament to our experienced sales force. COVID-19 did challenge some of the normal operations with restrictions placed on movements and operating rules. The merino wool season was supported by garment trade contracts and solid auction prices. However, crossbred wool values continued to be depressed, and this is accentuated by shipping challenges and impacts of the pandemic felt in the manufacturing and retail markets worldwide. The team continues to support and grow clients faced with tough market conditions.
The wool team's different New Zealand brand relationships continue to grow with New Zealand farmers and overseas clients. Bloch & Behrens Wool (NZ) Limited, PGW's subsidiary export company, saw growth in export volumes compared to the same period last year. The team is working on several new initiatives, and the price premiums obtained for our organic wool supply agreements have contributed to the increased number of clients. It's pleasing to note the increased awareness of wool's natural, sustainable, and biodegradable attributes from our overseas clients. Turning to our balance sheet. Our cash flow from operating activities saw an NZD 17 million outflow following investments in working capital, including the carrying of higher levels of inventory and higher tax payments. Capital expenditure was broadly in line with the prior comparative period at NZD 1.7 million.
Net interest-bearing debt as of 31st December 2021 was NZD 46.9 million. PGW renewed and extended its bank facilities for a three-year period during late 2021. Our dividend. Following the pleasing performance of the business over the first half of the financial year, the board declared an increased fully imputed dividend of NZD 0.14 per share, which will be paid on 1st April 2022 to shareholders on PGW share register as at 5:00 P.M., 28 March 2022. Environment and sustainability here at PGW. Fruitfed Supplies is the largest supplier to New Zealand's wine industry, and during the period, our Blenheim store was approved with AA level British Retail Consortium Global Standards, BRCGS certification for our winery products.
As an important part of the supply chain, we follow through processes to ensure our manufacturers and suppliers have globally recognized food safety credentials which are externally audited. To maintain our market, it's imperative that we meet the needs of our clients in this regard. By gaining BRCGS certification, we are demonstrating our commitment to our clients and as a significant advantage to secure new business. Over time, we aim to replicate the certification for all our winery serving sites at the Fruitfed Supplies business. Our stores in Marlborough and Hawke's Bay worked alongside Agrecovery New Zealand growing rural recycling programs to trial free plastic recycling for specific ag-chem nutrient bags of low-density polyethylene. This initiative will offer more sustainable alternatives of disposal, enhance services to our clients, and strengthens our commitment to the environment.
Following the success of the trial, recycling these bags is now available in these two regions and will be extended nationwide in the near future. Turning to our people and safety and wellbeing journey. Our COVID Response Working Group has continually evaluated the team and the steps we take as an organization to ensure the ongoing safety and wellbeing of our people and clients in response to the evolving risk and challenges the pandemic presents. The PGW Academy, established in 2006, focuses on developing talent within the company to expand employees' knowledge base and grow their expertise. Since its creation, over 270 people have participated in the program, who have gone on to enrich PGW in the agricultural and horticultural sectors.
Alongside our training programs, the Academy is one of our key platforms for fostering talent within PGW, and we're encouraged by the high caliber talent these programs have attracted. Developing the expertise and knowledge of our people is a key priority which is in line with our strategy of being the market leader in our technical offering and support. Towards the end of 2021, we launched our refreshed Online Account Services portal, which provides clients access to their statements and invoice details. The refreshed portal provides enhanced functionality, better visibility, and improved site navigation, as well as the opportunity for us to add new features and functionality in the future. Our corporate website has a contemporary design, and is more intuitive, easier to navigate, and provides an enhanced experience for users.
The refresh website is more representative of the depth and breadth of our business. Turning to outlook and market guidance. The directors are pleased with the first half results, and they're encouraged by the positive outlook for New Zealand's agricultural and horticulture sectors. There continues to be high overseas demand for red meat, and a record payout is forecast for dairy, and the demand for horticultural exports remains buoyant. The Ministry for Primary Industries is predicting New Zealand's food and fiber export values will exceed a new high of NZD 50 billion in the year ending 30 June 2022. This context at a macro level provides us with confidence that our clients and the sector are well-placed as we look forward to the remainder of this financial year and in the medium term. As a business, PGW has performed well.
It is clear about its strategic priorities. We're conscious of potential COVID disruption, and we're executing on our plans to achieve quality growth in our business and earnings. Based on the solid platform, the Board are determined to again raise our full year guidance for the year ending 30 June 2022 to around NZD 62 million at our operating EBITDA level. Notwithstanding these fundamentals, we remain cautious about the potential impacts of Omicron, continued global supply chain restrictions and increased input costs, which could have some degree of influence on our results. We will continue to keep the market updated as the financial year progresses. Our 2022 half year report is available on the Stock Exchange website or under our PGW ticker, also available on the PGW website. Thank you. That concludes our briefing for the moment.
I'll hand back to you, operator, for any questions.
As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound or hash key. Your first question comes from Christian Bell from Jarden. Your line is open.
Hi, team. First one from me is how much of the growth is from pull forward? Do you have any sense for the level of inventory stocking by your customers? Is it, for example, six months versus three months usually?
The pull forward that we've seen, Christian, thanks for the question, is into the autumn window. We're in harvest mode right at the moment. A lot of cereal crops are coming off and, you know, the horticultural crops have just, you know, obviously the strawberry and stone fruits have come off, key crops of apples and the viticulture grape crops and kiwi fruits. Clients have been securing that product that they need for the autumn window, including the likes of ground that's gonna go back into grass seed for maize. They wanna make sure they've got it for the next re-window.
Out into the new year, there's been a wee bit of pull forward for some of the animal nutrition products, but it's not a significant number, Christian. We simply don't hold that stock. That stock doesn't come into New Zealand until across the winter period.
Okay.
The second part of your question was around how much are our clients holding? They, the clients, as I say, they're holding that stock for the autumn period, but, you know, we don't have a measurement on, you know, what clients hold in stock. I make the observation, their ability to store stock on farm is actually quite limited from a regulatory perspective, because the volumes that they will need to hold, et cetera, is limited, and as well as security on farm. You know, making sure it doesn't move in the night, so to speak.
Okay, cool. No, that's helpful. You alluded to the onset of inflation or cost inflation. Do you plan on passing that on to your customers?
Yes. You'll see some commentary in rural media if you, Christian, don't follow that closely as we do. There's commentary about cost rises that the farmers are seeing in the sector. If you know our margins are fairly stable as well, so.
Yep. Yeah. Okay. You plan on just, yeah, just basically passing it on. Cool. Then, just in terms of guidance, you kinda just from the first question said that, some of that pull forward was for the autumn window, which I guess falls in the second half, to a degree. What are the assumptions for the uplift in guidance? Is it the combination of livestock getting pushed into the second half offset by some of that demand pull forward in the first half?
Yeah, Christian, it's Peter here. The basis really is really our year-to-date position at the end of January, really. We were seeing, you know, farmers actually pull forward those sales, as Stephen said. They're getting ready for autumn, but they've already actually purchased it from us. We haven't really shifted that much of livestock into the second half. It's still I mean, the second half is definitely an agency story and specifically on livestock, so we've still got our dairy herd sales to come through in sort of April, May. The main reasons for the lifting guidance is really where we've got to in terms of where we're at year to date.
Yeah. We see that built on that, strong market share that we're having in retail, Christian and, good demand from the real estate sector, et cetera, as well.
Cool. So January and February to date have continued to be strong?
Yes.
Yeah. Appreciating of course, Christian, that January and February are compared with spring, the spring months for the retail side of the business. You know, I know we're not as big as the spring months, but they have. January was good, and we're still continuing to trade well in February as well.
Great. Cool. Then just the last one from me, sorry, it's a bit long-winded. But just given the current environment where high commodity prices are more due to supply chain than demand, and that when supply chains ease, then prices will likely ease as well. It also appears that activity in the rural property market is above trend, combined with interest rates rising going forward. Just wondering, how do you guys think about growth going forward? Like, are you confident you can continue to lift earnings once the supportive backdrop eases? And if so, what would be the main drivers?
You're right. It is a long-winded question Christian, so.
It's basically.
It's a good question, I'm sorry. Yes, you know, as prices ease back, that will impact on our business. That's a reality. Agriculture can be a cyclical business. Notwithstanding that, a couple things that we would have in play in this space. Firstly, we have the market share gains that we've seen. Those are real. We are taking market share off our competitors. We are taking a bigger slice of the pie, and we're continuing to see that tick up. There's a number of ways we measure that. There's no single one we point to, depending on which sector you're in. Secondly, the horticultural sector.
Yeah, we are very strong in that sector. Those are permanent crops, and that is a sector we are seeing, you know, real growth and land use change. We're the beneficiaries of that in that regard. The other point in this space is, you know, ensuring that what's our product mix look like. We, you know, as we see food trends around the world, we're ensuring that the products that we bring to marketplace respond to those trends. They do provide us a margin opportunity because they are newer technologies. If we go back to our strategy, our strategy is actually look for growth initiatives in the business, and the balance sheet allows that. We are active in that space.
We haven't announced it into the marketplace, but our radar scan is out there and we continue to work through those opportunities.
Okay. Basically, you're confident that market share plus horticulture strength plus product mix should be enough to offset real estate once that sort of eases a bit and perhaps beef and dairy once those prices sort of subside a bit too. Is that kind of a fair.
Yeah. Based on what we see today, that should.
Yeah. Okay. Sorry, just with some of the larger property sales that you kinda mentioned in the commentary, above NZD 10 million, I mean, could some of that be to do with carbon farming? Like, are you seeing land use changes towards trees?
Yes, we are, Christian. We have sold some properties that have gone into trees, you know, and that does impact on some of our businesses. We've also sold properties that have gone into horticulture. As I said, there's also strong interest in the sheep and beef sector properties that have been sold as sheep and beef properties and going to remain sheep and beef properties.
Okay, cool. No, that's super helpful. Thanks for the detail, guys. Appreciate it.
Once again, if you wish to ask a question, please press star one on your telephone. There are no further questions at this time. Please continue, presenters.
Thank you, operator. Just in closing, would like to make a couple of comments. The Board, the Executive Team are proud of the results, and a testament to the dedication of our team and resilience of our team. We wanna thank them for their contribution alongside the loyalty of our clients. Lastly, to our shareholders, for their faith and the ability for us to re-execute on our strategic priorities. That brings the call to an end. If you do have any subsequent questions you think of anything, certainly available through our Enquiry page to take those. Thank you all for your time today.
This concludes today's conference call. Thank you for participating. You may now disconnect.