Guidance

May 23, 2021

I would now like to hand the conference over to Hannah Lynch. Please go ahead. Good morning, everyone, and welcome to Finlay's guidance update conference call. I'm Hannah, as the operator said. I would like to introduce you today to our new CEO and CFO, John Pennot and Rob Stoll. I just ask that you keep your questions to 2 per person. John and Rob will provide a couple of opening remarks and then we'll hand over to questions. John? All right. Good morning, everybody. Thanks for making the time available to come online and listen in. What I thought I'd do is firstly just introduce myself, the industry and my role here given this period of uncertainty we're in. Then I'd like to introduce Rob Stoll, who's sitting here with me. Then we'll go to the business of the day, the substance announcement and then we'll make sure we've got plenty of time to answer your questions. So for a start, hello to all the people who we've talked to and worked with in the past. As probably most of you know, I was here as the inaugural CEO of the company for the first 10 years of operations and have come back. I've been on the Board since I sat down as CEO in 2018 and now working with the Board in the role of Chief Executive Officer again. Look, I see I do want to just take a moment to clarify the way the Board and I are seeing my appointment. Number 1, while it's an interim role, we're not waiting for anything. This is not a holding pattern. There's a lot of work to do and we're getting straight on with it. The first step is to fully understand our position and today's announcement is really about that. Over the last 3 weeks, I've worked pretty hard with the finance team that's in place. As you know, and we're not sure at the moment made a change to the Chief Financial Officer. And that's all been about getting towards making sure that we can provide good clarity of where we see this year closing out rather than providing a number and then pointing to a bunch of risks that might be going on. So that's the first thing. 2nd is we need to deeply understand what happened. Clearly, this is a very disappointing result after 9 straight years profitability. Some of it is about factors out of our control. But a bunch of it is about factors in our control as well. And that's really where we're putting our emphasis, making sure that we deeply understand the things that we as a company have done and the choices that we've made so that we can build a robust plant going forward again and get back to solid and solid profitability. And we'll talk to that later in the call. And that leads to the 3rd part after understanding where we are, understanding the reasons we are where we are. That's the foundation for a good solid plan that we intend to be able to talk to you when we come back in September, closing out the year and talking about the year heading forward. So we'll be able to talk at a high level about FY 'twenty two and our expectations for that because we can see already that as we get some of the moving parts sort of normalize at the end of this year, we remain confident of returning quick returns to profitability and we'll talk about the principles behind that. But we'll talk about in detail when we see you in September. So I know you have lots of questions. Don't be too surprised that we've got those away when we talk in detail on FY '22. Let me introduce Rob. So Rob will be here for a few minutes. Rob will give a quick outline of the changes that have led to us making a different forecast for year end this year. Rob has been with this business for a very long time. In fact, he was the 3rd or 4th employee in the semi milk when we were first starting to plan the business many, many years ago. He's been with us for 14 years. He grew he came to us after several senior accounting and finance roles offshore in various entrepreneurial companies. He then worked with us as we grew up the finance team. He sat as 2IC under Nigel Greenwood for a number of years. And what until about 2014, I think it was, at that point, we basically faced losing Rob to a CFO role outside of the business and or we because Nigel was still firmly in the role. So we took role and put him to various operational roles in the intervening years. He built our plant system which is still at work today. Then we expanded his role probably 4 years ago into General Manager of Operations where he as well as continuing to oversee those planning functions. He looked after all the supply chain logistics warehousing, which is a really important part of that business and has done a great job of managing that for us. He's just come off leading the build of the rail siding and new warehousing. And that's a project which has gone very well, has come in on time on budget and has set to deliver the expected business performance improvement on clarifying our logistics program and getting a whole lot of trucks off the road and using rail heading forward for our sandal site. So he's really well qualified. He understands the business very well from his background from working at senior levels with colleagues. He's always been an advisor in the finance function. He has been involved in an advisory context in the last 3 weeks as we've as I've tried to work with the team to build a clear understanding of our current position. And so he's in a really good position to talk to the clients today. So I'm going to hand him the mic in a moment. Just before I do that, the only one overview comment that I would make is that those of you who are going to try and bridge back, use our comments and bridge back to the last forecast, it's just not quite as clean as that. This is the view that we're taking over the whole year where we've sort of gone back to looking at everything and making sure we fully understand what's going on and presenting and we're presenting the most as we can. So while the number is deteriorated, we don't see it as a deterioration a recent deterioration in business performance. It's just a clearer view. And if you compare the 2 guidance statements, I'd like you to think or I'd like you to just note that we've got a number out with a bunch of risks facing it. This one is we're really looking at those risks, taking it what we believe to be a clear view of the risk of those things materializing and putting it up to our expected financial results. So you won't see that we're facing a bunch of risk here. We're saying this is where we can land and we're going to manage it. But we're going to manage it as well as we can to get better than that and then make sure we get focused on delivering a market growth result next year. And so with that, I'll hand to Rob and he and then I'll summarize again before we open up for questions. Thanks, John. Just want to begin by saying how excited I am to be supporting John in the CFO role. It could be better circumstances, but having worked with John for 14 years with similar styles and having a very much strong passion for the business. I'm looking forward to just getting in. So to get into the detail of the release, the first thing we're going to point to is obviously the guidance is between $20,000,000 $30,000,000 in loss for growth and there's 3 key things that are driving that result. This one is our shipping delays And the shipping delays have been there for some time. But as we move in towards July with the step of that, they're actually going to get a little bit worse. And that's not helped by the fact that we had a little bit of bulge of quality hold items was in the last quarter as well. So during the end of July, really, we're going to probably have anywhere up to 10,000 tons of ingredient products, which is not going to be sitting in inventory, which we would normally have sold by year end. And so that's a drag on our P and L in FY 'twenty one. The second aspect and we noted this again in the March release is ingredients business is not performing quite as well as we've seen it perform in the past. And this is down to a few things. Obviously, we had a foot of milk from A2 products into the ingredients product. But through that, our sales phasing and the volume shift with the increase in volatility in commodity prices has, we think, erode a little bit of value. The market sorry, the BARTA AMF differential has been there and will continue to be there through the year end as well. So that's another drag on our P and L. And the third thing is as we've moved towards our year end and we still have the uncertainty around the demand based powder assumptions, what we produce and what we hold in stock at the end of the year is a lot lower than what we've had in the past. That coupled with some extra stock positioning has meant another drag. And so the other key aspects, you might ask me what's awaiting of those 3 areas. To be honest, the reason we even lease spread across those 3 areas is probably the best way to explain that. All right. So, look, just by closing out the year, we do make a statement that we've got good strong waivers for this year, which we think is appropriate. We tend to have in place right at the moment. Working with them constructively to get finance in place for next year, we've got some short term debt rolling off September, October. That was always part of the plan. We feel confident that we'll get that in place. And again, we'll be able to talk about that year end. We are not planning on capital raise. And I know that that's been a question for a number of you. We see a number of the analysts sort of rising to our efficacy. We would encourage you to look back through this history of the business as a business when it's running well has good operational cash flows. And we expect that that will return. Going into next year as we balance our base powder production with our sales of Candid Formula, even if we sell the same volumes that we've achieved in FY 2021, we can see a strong return to profit and a strong return to positive cash flows. And our CapEx program is running out. So our CapEx program will be much lower in the coming years. We have largely new plants and equipment that has fit the purpose. And so this is we're entering into a time where it's about filling out the plants to ensure that they are operating close to capacity and a period where we really focus on walking back up that value sort of path again. Probably, yes, coming on for Pankino, good progress on selling high value creams in China. Again, we would like to be able to talk to you about some more capital in a period when we will be balancing up again our capital spend. So we feel reasonably confident that we are going to be able to work our way through this with prudence and careful management. So I'd like to leave it there and turn the call over to all the questions that you might have. Your first question comes from Adrian Olsen from Dine. Please go ahead. Good morning, team. I was wondering if I could ask 2 questions. Maybe the first one for Rob. Just in terms of I know you sort of have to bring accurately those 3 things that are sort of driving the business for a loss. But are you able to give us a sense of the 3rd one, which is the sort of the energy region stuff? Is it a cash flow impact? Can you give us some of the cash the cash flow of those 3 things that maybe we sort of expect it to land from your end, on your planning? Look, firstly, just to answer the cash base, it's not so much cash, Adrian. It's more a position that we're taking, obviously, the stock division listening is non cash. The infant based powder production piece is it's a bit of both. Obviously, if we are making least powder and we're making more ingredient products, then we should be able to cash those ingredients products up. But you need to it needs to be being looked at and with the shipping delays. So if we still try to ship that product, then obviously they're sitting on a balance sheet as well and we'll have to cash up those products in the first now the start of the next financial year. If you let me jump in there, Adrian, if you look at the balance sheet over the last couple of years, we have been accumulating increasing amounts of inventory and we'll be working hard to balance that sort of the area that we can release cash by making sure our planning systems are working really well. And it will happen naturally as we return to normality after forecasting considerably higher IFC volumes heading into this period, having a lot of inventory and then just having to work right through that. Taking a more conservative position about where those IFC volumes end up, we'll release cash from inventory. And the shipping delay thing, it's a balance date issue. So the cash will quickly move through those volumes early in the new financial year, but we're going to be pushing them over balance data. Obviously, that pulls the earnings out this year's plan out. That also means that we won't have the cash on the balance sheet, but it will rectify itself pretty quickly as the year closes out. And they're quite good numbers that high commodity prices, higher numbers that come than you would see perhaps a year ago when commodity prices were considerably lower. Just Joe, I appreciate it. Just because I was going to add on the market, I guess, after Yes, we should think of it definitely having a 5 in front of it, Adrian. Okay. We'll manage the business from here forward with a perfectly overtime balance releasing cash where we can. But if this all pans out, Rob is right, that's where we're laying. Okay. So, in reaching our numbers, we're not on a good footing for the facility ramp. We should have at least something with the 5, that's all I'm saying. Correct. There's a lot of and there's opportunity for us to work in our balance sheet a little bit harder going forward as well, Adrian. Okay. And then just obviously, you've been in sort of recently interviewed review over the last couple of weeks. And the profits sort of and I know you sort of look backwards and then sort of look, but you thought the profits sort of come from £75,000,000 positive, come to sort of minus 20 to 20. And I appreciate like a lot of the comment is new, but there's no sort of impairment sort of do you think that you have a thought to discuss that or we're to assume that your review was also indexing when you discuss with your new providers like a pretty confident return on the long run earnings we are off that asset base? Look, we have turned our mind to whether there's anything that we should be impairing, and the viewers know. Again, we'll choose to at year end, but we have solid plans in place to return the existing plant and making the adjustments we need to get much better utilization out of the new business of plant which again we'll see earnings come up on those. So initial view is we don't see any need to appear the quality assets with a plan to see them timely way in the near future. And I would like to remind people to look backwards and we've got a good solid track record of that in the past. We have not I think it's just the fact that we haven't delivered well on that in the last year or 2. But the way we've traditionally approached these things, you've always seen us with good finalization and we'll put it back to that. Thank you. Your next question comes from Chelsea Lee Breda from Morgan Gas. Please go ahead. Thanks. Good morning, guys. I guess, first question for me. In terms of, I guess, on your view here around some of the internal initiatives that have been talked about to help drive the business forward. I mean, I'm just interested in what actually changed after your review. Have you accelerated anything, changed in any way? Or I guess, it's still relatively early days, but just interested in what change of direction, if any, or acceleration of direction you put in place at this point? That's a good question. And I think the big change has been a greater focus on the new term. So we traditionally have been in business. I think the strategy remains right. You expect that I've been sitting around the Board table. It's an evolution of the strategy that was in place when I was CEO. So I think we've got things wrong strategically, but I think that our focus on short term execution hasn't been strong enough. And so moving management's attention, that's away from some of the big long term things that we that are sort of not over horizon, but 2, 3 years away and getting us really focused again on making sure we're executing in the short term so that we are in our right to in our way to those other options that come. So there's you will have heard about projects like the Ringer, which is an execution strategy that Leon and the team put together. And but we're sort of steering that right back into the short term. So I guess the way I think is getting your operational savings as insurance can be. Are we still thinking about anything on the horizon? Exactly right. Yes. I guess I'm just interested Number 1, I do go back to that the start of the main part which is what's the job at hand here. The first is clearly understand where we are and that's what we're talking about today. Clearly understand why we are where we are and we've been able to plan off that to turn it around as quickly as we can of 3 steps and the change in emphasis that's happening internally are aligned with those things. Taking a very good look, not so much at the things that happened to us, but how we've responded to it and the things that we've been doing internally that have been quite executed on our strategy as cleanly as we might have. Plants aren't full and the way to make these big plants work well is to make sure that they're operating at all new capacity and then working your way up the value chain over time. Okay. No, that's helpful. And then just a few quick ones for now. You talked a little bit about inventory levels and obviously trying to focus on cash. What is there a view internally on what the expected levels of inventory or debt level is for this business at this stage? Look, we'll give you a better view over our view over FY22 as we discussed in the plan. But clearly, we have earned as much we're a long way from our earnings target in the last 12 months that's on the balance sheet. But we can see things that we can do on the balance sheet to release cash to help us through this little period. And we you will see us managing inventory just to maximize profitability in the next little while, but to manage the amount the volume of ingredients we're buying in, the amount that we hold on hand at any given time. And it does run back as you suggested to getting the basics right. If the manufacturing process is running really well and we're making products coming out and they're not, we don't have quality issues sort our way through. It's much easier to keep stock going quickly and to not need to accumulate the volume of the numbers that we have you have seen in accumulating on last week. So, we should probably have to see some of this coming into fruition in 1H 'twenty two, FY 'twenty two? Is that the right way to think about it? Yes. Look, it's Rob here. Look, absolutely. I mean, I'll give you an example. We obviously, at the start of the year, this financial year, we were running at much higher demand volumes for A2, and we had a raw material balance there, which was servicing that production and that demand. And the demand came reduced significantly at Christmas time, we were left with the power to weight, the protein powder, for example, and that's not payable. And so we need to work our way through those balances, and we need to get down to a really efficient inventory level on that side. And it's the same with base powder. We need to be careful that we don't make too much base powder because then we could run out of expiry issues and all that sort of stuff can be done more efficiently through FY 'twenty two. It all comes under this category of being the basis right. The basis run the business really well. You'll see it coming through in profit and balance sheet and all the places you would expect. Thanks for the color. Thank you. Your next question comes from Marcus Curley from UBS. Please go ahead. Good morning, guys. Just 2 as required. John, can you talk a little bit to whether you think any of these issues are significant from next year? I suppose in particular, you did mention a bit of pressure on ingredients margins, where these products are being sold into China and potentially where commodity prices are. Just keen on understanding, of these 3, any significant flow over to next year? Nice to hear from you, Marcus. Look, most of these issues we see is contained in FY 'twenty one. The big external factor in terms of downswing in our volumes of IFC, which actually happened towards the end of the first half. They have had a knock on effect, but we don't we take that time in for this year. We're with Hawken and so we had a lot of milk that got diverted into the whole milk powder, some milk powder. And we were already looking at quite significant increases in that because of extra milk that had come out of the business and for this year. So our Ingredion business grew and in a year, I'm not going to say volatile, it's just that we've prices came off a bit at the start and then have gone up pretty strongly in the second half. And if you don't get your phasing quite right, that's where you really fall out. And so it's not a question of us not achieving the margins on a day to day basis. I think the team has done a reasonably good job of it and getting good. We have a great group of customers. They usually premium end products which can attract the margin on the day. It's just about getting your sales phasing right. And as we look back, we haven't always done that. We haven't always sold the product. We haven't always sold to Optimum products mix and we haven't always got our phasing right. And that when you run the models, you don't have to be very far out to make a decision that has. But the good news, so we can turn around really quickly. And then just secondly, John, no mention of infant formula in the list of issues. We've seen A2 announced a big stock write down program and a desire to freshen the product being delivered to customers. Has that caused you any issues with your own sort of way or other ingredients in terms of carrying costs or your base powder in terms of carrying costs? No, it's the it's ultimately it's determined by the ordering and offtake of these IFC products. And actually the estimate that was made right back in December about the year on year swing in volume was quite close. So that's why we're not talking about it, I guess, because this is not a further degradation of volume. This is just financializing the consequences of what happened. But also I think it's just a reality that when the tide goes out, the rock starts showing through and we've got a clearer idea of some of the other things that have been happening in the business. During this phase, we went through very quickly where we had very good earnings and very good free cash flow, but too much of just went on to one side of the business and not enough on other parts. And we're less what we're looking at as a year, we're actually as well as that movement, we've left a lot on the table. And that's why I returned to this 3 step plan here that's rather my assignment as one, understand where we're at 2, understand why we're there and 3, plan in place to turn it around. And plan is not waiting around until IFC volumes rebuild, but it is executing really well on the new customer we have coming to Kokono, which we think is a bit which we continue to believe is a really exciting opportunity. That opportunity was one that was built up over many, many years by slowly building the relationship. It's one where actually we are going to see genuine diversification in effectively our PDX business, the business that is core to the way we've developed, the things that we're really good at. So that will bring balance and de risk us there and brings a key customer for that POCO investment. Again, making sure our ingredients business works really well. It's always been a really important part of the business. At times we've lost sight of that. It's grown in volume. And it is I'm not going to say it's grown important. It's been important, but perhaps we haven't focused on as much as I'm sure. It's core. This business makes money because it has a good solid ingredients business where we buy farmers milk. We make premium ingredient products and we have a really good range of customers who we sell that to. And then we march up market with higher value products, the pediatric prep products, the formulated products that we manufacture and these days take all the way through to finish consumer products for our customers. That remains core. When we do it well, that's a very good Irma. But part of the reason it does well is because it's built on that solid ingredients business and we'll you'll see that getting those things working really well again. Thank you. Thank you. Your next question comes from Andrew MacLennan from Goldman Sachs. Please go ahead. Good morning, John, Robin. And thank you very much for your comments today. Just a few questions from me. And it certainly sounds like you're reasonably confident in this regard. But just thinking about covenant management in fiscal 'twenty two, how comfortable do you feel based on how the business is likely to be running during that period? Do you think that you'll need to continue to manage the mix during that period? And maybe if you could sort of talk to how you expect that mix change you John, you talked about marching up the value curve. I'm just wondering how dramatic the mix might move in fiscal 'twenty two. What you'll see is doing when we start talking about plan in 'twenty two, you won't see us making heroic assumptions about the changes. What you'll see, the one off effects that we see contained to FY 'twenty one coming out of the forward projection. So number 1, there's been a lot of talk over the last 3 or 4 months about the impact that the unrecovered fixed costs in our formulated dairy business have had. The impact of that, that's really the we carried a lot of base powder inventory and we didn't need to manufacture very much and so we've got a lot of unrecovered fixed costs in the business this year. That will be gone, but we will have worked our way through that. And that's a big number that will return to even if we repeat our sales volumes of IFC for next year, you'll see that come right back in to the business. 2nd piece is this ingredient piece that I've been talking about. We see no reason that we won't be able to return to managing that the way that we normally do in the earnings relative to prevailing market conditions return to normal. Now those two things happen, we're back robustly profitable. And then beyond that into 'twenty three, that's what is coming on, some other opportunities that we're working out. That's when you see perhaps the returning to the sort of mix between ingredients and value add opportunities that we've been used to over recent years. Okay. Thanks very much for that. So just in terms of how you balance out your strategy versus the interest of your major shareholders, do you see any potential problems in that regard? No. So 2 major shareholders, firstly, Bright of China. Look, the amount of business that we do with Bright has always been reasonably small. So that's not a big issue. They're largely a financial analyst. When I see us doing a good job running the business, that always comes first and foremost. Look, we do a little bit of business. We're actually talking about a few opportunities at the moment that come to fruition. There will be a little bit more business than we've done, but it's on commercial arms length. Actually, we have the same relationship with A2, A2 almost 20%, but a really important customer because we manufacture such a high proportion of their IFC business, which is so important for their business. So you'll see us continuing to work really closely with A2, given the landscape that we've got in front of us in terms of volumes, in terms of the strategic imperative in the business now. And a new CEO and place over there like I think is working constructively with them. They've been quite public about their need to build a clearer view of their supply chain. And that will be really important for us because it allows us to plan better, allows us to make sure that we manage that lets us manage our inventory better. I think that we're 100% aligned on those. And it actually also allows us to serve them better as they have changes in their requirements in terms of uptake volume. So look, I don't see any challenges than where we're hitting any changes you will see us make. I think it will help overcome some of the things that we've heard in the last couple of years as we've just been sort of growing and focusing on that growth for that customer. You'll see us taking more balance here across the business going forward. Thank you very much. Thank you. Your next question comes from Maya Sarai from Radio NZ. Please go ahead. Thank you, John and Rob. I just wonder if you can give any indication on how things are looking for your processed milk price and also any information you might want to get to our pharma suppliers, so potentially concerned by SMA's performance at the moment? Yes. Thanks, Meyer. We have ultimately, we're a dairy company and we need strong support from our farmers. The farmers need a lot of companies that are making struggling and we have this year. But I mean, we again, I'd like to remind everybody that we've had 9 straight years of profitability and some really strong profitability hopefully through the last 3 or 4 years. And we see it as a story where we see some short term issues and we see ourselves returning to that position pretty quickly. There's no great change in strategy working with the farmers to make sure they're doing all they can to add as much value inside the farm gate as rewarding them for this. We've always had a promise to our farmers that we will leave them better off in the long run than their alternatives. That remains absolutely true and dear to our hearts. So we're not at all concerned that this will see us deviate from that. And as they should, they'll wait and see what we do. It doesn't really matter at that point what company say. That's what that number is at the end and we understand that and we don't believe they'll be disappointed. So, you can say, you can compare competitors with price or what do you think? It's not about that. Like some years we do a little better and other years we don't do quite as well. We have some very good premiums that the vast majority of the farmers are part of now. And if you look back at the average milk price that Simmel has paid versus others in the market, by and large, our farmers have been well rewarded and we don't see that. Thank you. Your next question comes from Nick Crossley from ACC. Please go ahead. Yes, good morning gentlemen. Could I just ask just clarifying the scope for the profit rebound in FY 2020? You obviously talked to the fact that we have reversed sort of the fixed overhead under recovery issue with regard to IFC as you won't be entering here with such a large competition. I think your predecessor also talked to the fact that if you were able to have better visibility with regard to your ingredient production during the year, things would have been a lot easier. And given that you sort of suggested we assume IFC volumes are flat, you should have therefore better visibility as to how much ingredients you're going to produce during the year. Could you just give an indication as to whether that second part is likely to be an important driver of profit rebound? And how that compares to the initial PD that you mentioned in terms of the OpEx overhead recovery issue with regards to the IFC? Thank you. Look, again, we'll give further detail when we come together and are able to have a complete view of FY 'twenty two sorry, FY 'twenty one and we talk to how we're thinking about FY 'twenty two in September. So we won't there's one of those ones that I'll push down the road a little bit. But what we are saying here is that the recovery next year, there's 2 big parts to it. First is, as you mentioned, the fixed cost recoveries that we'll get as our base powder manufacturing rebalances with our canned offtake. And the second is that we see we'll be able to manage our ingredients business much better. It's probably fair to say that the IFP is more important, but we're seeing some pretty substantial numbers in the ingredients performance this year and the magnitude of that rebuild next year. Some of that is things that we've done to ourselves. Some of it is just if you have a big volume that pushes over balance date, because of shipping delays, the earnings from that and the cash from that don't come in until it might be a matter of weeks after that, but that's not here in the year end accounts. Okay. Thank you. Thank you. Your next question comes from Jonathan Snape from Bell Potter. Please go ahead. Yes. Can you hear me okay? Hello? This really is like the last 3 years and somehow disappears. It's still the same people. It does feel a bit that way. Welcome back. A couple of questions. And if we can do one on 'twenty two, and I know you kind of taken a lot of these down the road. But I just want to make sure if I've got got moving parts right in terms of the bounce back. I mean, it sounds like a lot of the $20,000,000 to $30,000,000 that you're calling out today is largely one off or timing issues. So if you use it, we should get that back plus you're getting the recognition of margin in addition to next year's number. I think before you've spoken about $20,000,000 in cost initiatives. I'm imagining you're still pretty comfortable with that number that's out there. And if not, happy to hear why not? And then as well on the ingredient side of the equation, but I think Aimison Carter seem to in the last couple of trading sessions anyway going back to kind of the historical averages. I suspect you try and hope to get that in there as well. I mean, for those three things kind of unwind, I mean, you start to get those numbers that you're kind of talking about profitability on flat volumes for IFC. Would that be the, I guess, a ballpark way of thinking about, I guess, moving parts without having to put too much into other banks? Yes. I think that's a reasonable way of thinking about it, Sean. Okay. And then following on from that, I know you mentioned covenant waivers for this year. Are you able to say how far they've given you waivers for? I think before you used to talk about a 4x total book, we've been 2 or 3x into the bond. Is that kind of how we're thinking on where the business has to get back to, say, to a month's time or 8 months' time? Look, John, it's Rob here. Look, yes, we've gained waivers and at the moment we're in a process to really stress test our P and L and our 4 P and L and balance sheet and discuss it internally and with the bank. So we're working through that. There's a lot of moving parts as you know, but we'll be wanting to make sure that those forecasts are conservative enough and we've got enough room within both facilities and bank governments to make through if through FY 'twenty two comfortably and beyond. All right. Great. Thanks a lot. Thank you. You now have a follow-up question from Adrian Auckland from Jarden. Please go ahead. Good morning again. John and Rob, I was just wondering if you can comment on, obviously this is a quite a bit of move forward from here over the sort of next 12 months. Can you just sort of give us an update on what's going on the regulatory front? Like what sort of renewals you're thinking on the half month or so? Like what are the sort of outstandings are on that front of the business? Topic with us? Nothing has changed here, Adrian. We are continuing to work towards the same dates we've been talking to. It's a really important project for us obviously in terms of making sure that we get those renewals done. We have to be mindful that we're in a COVID environment where travel isn't going on. But there's been good progress in terms of between New Zealand government and China to make sure that that is going to be achievable through the regulatory groups working together. We're not so I don't think there's any change in the way that we're looking at those risks or the way we're managing them. What is here is that we still have other processes in place, which may open up other areas of business beyond the work that we're doing at the moment. Again, going back in history, those for more products, more brand slots, but actually still in play. And I'm just starting to turn my mind back with our team to how we position well position the capital structure with those things underneath the all important of the fact that we're making sure that we maintain our regulatory approval for the China product for AT. We don't have anything particularly to point to in terms of the additional cost there in there. And just for a reminder, what is that sort of milestone date for the China label? That's about 18 months away. But again, just look back to what we said last time, because I'm not going to see everything after 3 weeks. Yes. That's what we late days is not one of the things I am. Adrian, we've lost There's a lot of work going on and they're not too worried about getting their way through that. Your next question comes from Nick Ma from Macquarie. Hi, guys. Just on the any of the stuff that you've done around you've got a more positive approach to things like inventory, is that all kind of actively push earnings in 'twenty two to obviously help make those covenants easier when you're going to waive 'twenty one covenant? That's a really good question, Nick. I'm not putting any attention on that. It's really just about making sure that we're being realistic about the volume and value of the inventory. And it is more than I mean, it's actually about coming back and thinking about our balance sheet, thinking about where we can release cash from and make sure that we're sort of managing through this period considerably and conservatively. It's the overall theme of this call I hope, because we're looking at ways to get our sales up, get our cost structure down and make sure that we're not submitting more capital than we need to. Some of those basic things that businesses need to do to run well that we've taken our eye off the ball through the years when we were growing fast and earning plenty of money and carrying capital. And then, obviously, you're kind of back in the old role and you've been on the board. Is there anything from what you've seen any assets you would consider selling over the next couple of months? Look, at these moments, obviously, you got to look across the portfolio of assets that we have. You won't see us selling any strategic assets, but we're holding assets, but we don't need to. But of course, we'll have to consider that as a way of making sure that we make that balance sheet work a bit harder and that's in line with what we just said, how do we get ourselves going well, how do we manage our costs and how do we make sure that we're not committing capital that we don't need to. So which assets in line with you? I'm not going to be drawn on that. Good question. I mean, there might be material assets. They're not There are no further questions at this time. I'll now hand back to John for closing remarks. All right. Thanks, everybody. Thanks for your thoughts and comments. And one thing that we will be doing is we can catch up with a number of you in a couple of weeks' time. When Rob and I have sort of got a Rob has been in the role for a week now. I've been in here for a couple of weeks. Given the number of changes that have gone on, we see this. We do want to give people the chance to sort of sit down and talk to us further about FY 'twenty one and as far as we can FY 'twenty two and then leading into the normal ratio after we close out the year in September. So I do look forward to catching up with you and seeing your ongoing observations of the business. So thank you very much for your time today.