Origin Enterprises plc

Good morning, ladies and gentlemen, and welcome to the Origin Enterprises PLC interim results presentation 2025. Just a reminder that this call is being broadcast online and the presentation is available to view on the Origin Enterprises website. I will now pass over to Sean Coyle, CEO of Origin Enterprises PLC. Please go ahead, sir.

Thank you, Sergey, and good morning, everyone, and welcome to the first half of the 2025 year conference call. I'm joined by my colleagues, Colm Purcell, our Chief Financial Officer, TJ Kelly, Managing Director of our Living Landscapes Division, and Brendan Corcoran, our Head of Investor Relations. Firstly, we'll proceed the presentation by giving the typical safe harbor statement, and we'll move on to the figures now. So overall, we've had a very strong first half performance in the year with strong growth in organic operating profit, as well as some supplemented growth through acquisition in the living landscapes division. Despite the fact that volumes in Q1 of last year were down by 12.3%, In the Ireland UK segment, we have seen a very strong recovery in the second quarter and we're down by 1.5% at the end of H1. The business has seen recovery across Ireland UK and living landscapes has grown significantly as well with operating profit growth of 17% and EPS growth of 38% in the period. As I said, agriculture has seen a strong bounce back. And were it not for the depreciation of the Brazilian RAI against the euro, in fact, we would have seen very strong growth within the agriculture segment as well. So the improved planting area and on-farm conditions in the northern hemisphere has helped the recovery significantly. but largely that has been, I suppose, offset by weaker Brazilian RAI against the Euro, resulting in a decline in the LATAM profit, and overall agriculture is lying ball with last year as a result of that. Our living landscapes business continues to scale up reasonably quickly with a strong growth and operating profit driven by both organic growth and also the benefit of some of the acquisitions which were completed in the first quarter of the year. We continue to focus on our capacity to grow and we have strong financial strength with a new facility agreement recently negotiated which extends our facilities out to 2030 with the option to extend those by two further one-year terms. a slightly larger facility at 440 million compared to the 400 million which we previously had. We completed the final element of our 80 million euro share buyback, which was flagged at the capital markets day in 2022. And that was completed again in the first quarter of this year. From a strategic perspective, we continue to focus on developing the scale and range of products and services offered in the living landscapes businesses and that's been a success in the first half of the year as you can see from the the figures and we've appointed a group head of biostimulants adjuvants and micronutrients to continue to develop and support the growth of the value-added products within the agriculture segment you can see the individual figures for each of the divisions within the colored boxes on the top right hand side of the page and I don't intend to go through those now as we'll touch on those in more detail later on. So we began a rebranding journey this year and have I suppose been disclosing separate reporting divisions now for a couple of years in order to bring clarity to investors and We're separating our agriculture division and our living landscapes division. And that should provide visibility to the margin profile of living landscapes, which continues to improve and which should have a higher margin profile than our agriculture business. It allows us to see the real growth rate of that division when separated out from the agriculture businesses. And we should also be able to see the lower working capital commitment to that living landscapes division. Business over time as we show the separate reporting and you can see the three principal areas in each of agriculture and Living landscapes that we report on on the page So firstly to our agriculture businesses within the Ireland and UK segment we saw strong growth within the period the operating result for the year or half year of improved by 3.4 million, driven really by strong fertilizer demand in Ireland, a much larger UK wheat cropping area in the UK, and decent momentum now going into the second half of the year, with a decline in H1 volumes of just 1.5% compared to the Q1 decline of 0.3%, but a very strong order book within both our fertilizer and feed businesses going into the third and fourth quarters. A couple of the dynamics from a backdrop perspective, certainly grain and oilseed prices are causing some concern at a farm level. So there is a level of spend which is held back given grain and oilseed prices internationally. And that has been a challenge, I suppose, in terms of progressing demand on farm. But we do hope that that will improve in the second half of the year. As I said, soil nutrition volumes are doing reasonably well. And in contrast to the low grain and oilseed prices, there is really strong demand and strong output prices within the dairy segment. Beef prices are strong. Pork, poultry and egg prices are strong. And that has helped considerably to drive demand within our animal nutrition segment, as well as the lack of fodder within the Irish marketplace due to poor grass growth during the course of 2024. So that poor fodder availability and very strong output prices for all of the major non-grain kind of segments of the market have certainly driven growth within our animal nutrition businesses. Within continental Europe, again, it's been a mixed picture. Poland certainly performing very well with strong growth in the higher margin categories of BAM and seed, and seeing volume growth as well. And Romania seeing higher volume growth levels actually than in Poland, but a real mixed bag in terms of the types of product being purchased, certainly trending towards lower value products and despite the fact that winter cropping has grown within the Romanian market the mix of product sales has trended towards the lower value and lower margin items within Romania so profit in Poland up and profit in Romania down on the previous comparable period but overall we're seeing a reasonably steady performance within our central European businesses and were reasonably comfortable that were well set for a strong second half performance within that market. Within Latin America, we touched already on the impact of currency translation within the business. And overall, before that currency translation, we saw a very small diminution in profit for the first six months of the year. back by circa half a million on the trading picture in the first half of 2024. That's come about despite volume growth of 11.5%. And principally, it's a result of a change in mix of profile of the products sold. So we're seeing growth across all product categories, but faster growth within the lower margin controlled release fertilizer space compared to the speciality products and P&N products that we would typically sell within this business. And there has also been some margin shrinkage at a gross margin level, a small few percentage points of gross margin reduction as a result of what is a fairly intensive and price competitive market in Latin America at the moment. We've talked before about the impact of overstocking at the retail level within LATAM. and the impact that that has had on some of the people that we supply to. AgroGalaxy, who we previously would have considered a reasonably big customer, went into Chapter 11 at the tail end of last year. And a number of our other customers are also having challenges in terms of continuing to maintain a good credit profile within the market. And where our credit insurance has been withdrawn or taken away, we've simply switched off sales. So AgroGalaxy and a number of other large customers have seen that credit withdrawn in the market and we've simply had to go and find other customers and sell to other customers in the context of what is a pretty challenged market over the last 12 months. But you can see there we've engineered and I suppose delivered a reasonably good outcome despite all of those challenges on the sales front. So we are able to find new customers, we are able to find good paying customers within the marketplace, but it has come, I suppose, at the expense of a small amount of reduction in selling price as a result of that.

TJ. Thanks, John. Moving to living landscapes then, which had a strong start to the year, as you've highlighted, with operating profits up €2.3 million the prior year, with €0.7 million of that coming from the newly acquired businesses in the portfolio. Underlying profit improved year on year, driven by our sports business, where generally playing surfaces and the urban and green spaces that we service had improved autumn conditions relative to the prior year. And we continue to see the benefits of driving growth through an improved and broadened product offering in the space. In our landscapes business, again, I would say conditions were generally improved year over year, that the autumn 24 was somewhat improved over autumn 2023. And we saw the benefits equally of expanded product offerings in that portfolio in part through the acquisition of the ground tracks business and the additional product portfolio that that has given us. I would say overall, both the sports and landscapes businesses, given the solid start in the first half, are well positioned for the second half of the year. Looking at our environmental businesses then, in addition to the contribution of the newly acquired businesses in the first half, we did see good underlying growth in both NEO and Keystone environmental businesses. And we see the market remaining strong for the environmental and ecology consulting businesses as we look into the second half with overall solid to strong pipelines of businesses for the second half and therefore the full year. The graph on the bottom left-hand corner then just really demonstrates for us the evolution of the earnings performance over the last number of years, albeit H124. was slightly impacted by those poor conditions on site, as I said, but we're seeing the benefit of the acquisitions and underlying growth in performance coming through in the first half of this year.

Great, thanks, TJ. Good morning, everybody. Starting with some of our highlights on financial performance on page 13 of the presentation. Group revenue at $831.7 million is 3.1% behind prior year on a constant currency basis. This is largely driven by a 4% pricing impact as we saw deflation in the market, and particularly across the global seed and fertilizer prices, as Sean would have touched on earlier. This is partially offset with a 0.8% benefit from acquisitions. Overall volumes, when we exclude crop marketing, grew by 3%. with growth largely driven by a strong Q2 performance, again, as Sean would have referred to earlier. Overall operating profit for the period at 14.9 million represents a 17.1% increase on the prior year. As Sean noted, we saw strong underlying growth across both agriculture and living landscapes, with report numbers somewhat impacted by the lower Brazilian RAI relative to the Euro. Our operating profit margin for the period improved across both agriculture and living landscapes, In agriculture, we saw 10 basis points increase highlighting the resilient performance of the business, careful cost management and strategic inventory management in a falling market price environment. Living landscapes saw 260 basis points increase driven by strong sales growth relative to a relatively fixed cost base. Our associates in joint ventures results showed good growth in the period on the back of a strong prior year number supported by strong demand for animal feed. Then our overall adjusted EPS for the half year was 5.17 cents, which represents a 38% increase on last year and strong growth really across our two segments, as I noted earlier, being the key factor in the growth there year on year. We recorded net exceptional gains after taxing the period of 10.5 million. The two main elements of these gains were from a revaluation of our investment properties and our share of the profit on the sale of certain assets within our associates and joint ventures. Looking at our balance sheet position then at the end of H1 on page 16, our overall net debt position at the end of H1 was $270.1 million, which was at 2.42 times our EBITDA and well within our banking covenant position. The increase in net debt from prior year, as can be seen on page 15, we've just included the detail there, so on the rolling 12-month basis, is largely impacted by an increase in our working capital strategic capital expenditure investments, particularly in the prior year, the completion of the share buyback program and our outflow from M&A. I'll speak further to M&A and share buybacks later in the presentation. On the increase in working capital, this was largely driven by further payment of 26 million in H1 of this year on previously withheld sanction payments. We are now largely complete on these payments with a balance of roughly 5.7 million remaining to be done. So, as a result of our working capital and net debt now is returning to more normalized levels. We did see an increase in our finance costs in the period as a result of the higher average net debt, and you can see that earlier in the P&L. And as Sean mentioned, on our facilities, we completed refinancing of our credit facilities in January, securing an additional 40 million in available credit. and extending our maturity to 2030 with the option to extend by another two years. Looking at capital allocation then on page 17. So we continue to pursue a disciplined approach to capital allocation. Since the commencement of our current five year strategy period in 2022, we've generated strong free cash flow, which has allowed us to invest in longer term growth and build on our diversification strategy, but also to deliver stronger cash returns to our shareholders. Since 2022, we've spent 90 million on strategic capital expenditure, which has provided us with additional capacity and capabilities to support the future growth of the business. These include a new Folic plant in Poland, a new micropack production facility in Romania, an expansion of our R&D and production capacity across the global footprint. We've also largely completed the rollout of our new ERP Dynamics 365 platform across the Ireland and UK businesses. With the completion of these projects I've mentioned and with the nearing completion of the ERP investment across the UK and Ireland, our strategic capital expenditure will be lower in future periods. We've spent 86.7 million on acquisitions since 2022. I would note that this includes over 30 million relating to the closeout of the put and call option in respect of our fourth green business in Brazil, which was acquired and we will have fully accounted for that since 2018. The balance then of our profit largely focused on developing our live-in landscape business. The focus on live-in landscapes has allowed us to build a business that has more sustained earnings with less working capital investment and less exposure to a weather-dependent agricultural sector. As we can see from H1, the investment benefit is coming through at the income statement and we will continue to grow as we integrate our recent acquisitions. We've returned $144 million through dividends and share buybacks to shareholders since 2022. This represents almost 50% of our current market capitalization. So with notwithstanding our investments noted above into our diversification strategy and creating long-term sustainable earnings for the group, we are committed to providing returns to shareholders, and this will also form part of our future capital allocation decisions. For our shareholders, we will be paying an interim dividend of 3.15 cents for those on the register on the 30th of May, which is in line with previous years. With our final dividend in respect of FY24 paid in February, our overall dividend yield remains strong and provides real value to shareholders. I will now hand back to Sean.

Thanks, Colm. So I suppose the changing shape of the biodiversity and environmental regulation picture, particularly from a European perspective, has guided us in terms of the areas where We need to continue to invest both to improve the business, diversify the business, and also re-engineer some of the product sets and capabilities within our agricultural core. So we continue to try and improve the profitability of the business from within through adoption of new products and technologies and a significant investment in R&D in order to essentially make the business more sustainable in the longer term. From an agriculture perspective, our focus across each of the three principal segments is set out on the page there. So from an Ireland and UK perspective, we continue to leverage the leading market share positions that we have. What our best in class and well-invested operating infrastructure capabilities within our crop protection business, within our seed and soil nutrition business, and within our animal nutrition businesses. We're continuing to drive a change in agronomic advice towards more sustainability, increased innovation and investment in R&D, and we're finding more alignment between the environmental goals within some of our living landscapes businesses and the product offering and influence that we have on farm. From a continental European perspective, we are the leading technical advisor in the continental European market. We have leading R&D capability and a focus very much on technical selling, more strategic products within the portfolio, particularly within the BAM range. So we're continuing to grow our organic level of sales within the higher margin areas of BAM and other speciality products and services to complement that. So for us, it's about maximizing our share of wallet and optimizing the mix of products sold in key product areas rather than chasing commodity sales in that continental European segment. And then from a Latin American perspective, obviously we've launched our first biologicals business about 12 months ago at this stage. that continues to see growth and continued success and indeed some margin expansion in the last six months, which is good to see. And we also need to leverage the very significant capital investments that we've put into the Latin American business to continue to drive organic growth there in the coming periods. So, TJ.

Thanks, Sean. As a brief stand back then, we continue to see the protection of natural capital remaining a core driver of growth, given its importance to both sustainable and sustained economic activity. And as a result, there continues to be a focus at both societal and governmental levels to invest in and protect that natural capital. And that's evident, as Sean mentioned, through biodiversity and environmental regulations. and the various commitments that have been made at a global, EU and state level. Again, as Sean has pointed out at origin, this is a journey that we've been on for quite some time already to our core agricultural businesses, whether that be, for example, to the provision of specialist biological or protected fertilizer products, or in our living landscapes businesses through further extending our product and service capabilities in the built environment or through our more recent investments in the environmental and ecological businesses, all representing increased revenue and margin opportunities for the group. As an overview of our living landscapes businesses then, our sports business provides agronomic advice and technically led solutions required in the management of turf in the sports, public community and recreational spaces. Our landscape business provides solutions, again, products and services into the professional landscaping, large construction and development project sectors across a range of end uses, including in the areas of sustainable drainage solutions, ground reinforcement products, and a range of products in support of tree planting and afforestation. Our environmental businesses provide a range of ecological environmental services across a number of end use markets. And looking at the portfolio in total then, our focus primarily is very much on leveraging the revenue synergies that exist across the portfolio within living landscapes itself, but also across living landscapes and the wider group portfolio where we see increased opportunities. And we have been building out the organization capabilities and interconnectors, if you like, across the businesses to ensure that we continue to push for and drive for that organic growth as a primary focus with that growth then of course supplemented by targeted M&A activity where that presents an opportunity. So we commissioned a piece of market analysis across developed European markets over the last six to nine months, very much focused on market sectors in the areas of specialist product distribution across a range of product areas with commonality to our current product portfolio. We also then looked at environmental and ecological consulting businesses, again, across those developed European markets, consistent with the types of products and services that we offer in our recently acquired businesses in this area. And within that service focus space then, we've also been looking at applied services, i.e. businesses involved in land management in areas such as habitat restoration, for example, which we currently do in our keystone businesses, and also in areas such as industrial vegetation management in the infrastructure sector. Overall, I would say that this analysis reinforces the fact that the market and markets in these areas across the developed European economies still remain fragmented and represent opportunity for targeted M&A activity aligned with our ambition to grow the Living Landscapes Division.

Thanks, TJ. So in terms of our focus for the next 18 months as we head towards the end of FY26, three key areas optimizing our agricultural core and continuing to maintain discipline in relation to working capital investment and a focus on return on capital employed. we continue to scale and adjust services and capabilities within our agricultural business. And in fact, towards the tail end of last year, we had some restructuring within our digital business and within our agribusiness. And in the first half of this year, we had some redundancies within our Latin American operation to flex, I suppose, the team size there and capabilities there in order to ensure that we improve the profitability of that business and have focus in the right areas. We continue to invest in attracting talent and retaining key talent within the organization and have had a number of senior appointments within the living landscapes business and also within our BAM portfolio. over the last 12 months, which will be important for the continued growth and higher margin areas of the group. From the perspective of our living landscapes business, we do continue to intend to grow the living landscapes business to 30% of operating profit by the end of 2026 and at least have an exit rate coming out of 2026 at that level. We expect it will be circa 20% in the current financial year, which is reasonably strong growth year on year. We're continuing to broaden the portfolio of services that we're offering with additional complementary product areas and service areas. And it is our intention to expand the offering into Western Europe. And we have a reasonably strong pipeline of potential acquisitions in Western Europe, which we're in discussion with at this point in time. And from the point of view of preparing the business for the long term, we continue to migrate a significant amount of our product set towards more sustainable products that will continue to improve grower yields, but be more, I suppose, attuned to the environmental regulation, environmental challenges that each of the various jurisdictions that we've operated in have signed up to in terms of commitments. So a greater dependency on coated fertilizer, a greater dependency on slow-release fertilizer, and a greater switch to biological products within the product offering. We've utilized now and are beginning to utilize now the benefits of the D365 implementation in terms of building tools and capabilities on top of that. So we have new customer portals for our agri business and also for our origin amenity business, which will allow us to interpret data and get data insights at a greater level into what customers are buying and the potential to cross-sell and upsell to our individual customers, as well as allowing them to self-serve to a greater extent. And in addition to that, we continue to see ourselves investing in capabilities and tools which will combine the satellite technology and drone technology that we have and essentially provide agronomists with recommendations based on AI and learnings from the actual progression of the R&D data that we've gathered in the past and the patterns from a growth perspective that we can evidence within our digital technologies and satellite technologies. We intend to complete the ERP rollout across our Ireland UK businesses. All of our major businesses in Ireland UK have had the product deployed at this stage. and we're moving on to some of the smaller business units within Ireland and UK, which we're largely doing ourselves rather than using third-party implementation people. And we'll also commence the rollout of new ERP systems within our Central European business and Latin American business as those are required to be replaced in the coming years. So a significant job of work and investment in improving and delivering on the capabilities that we need to grow out into the future. So just to summarize, a very strong operating profit performance in the first half of this year, despite the fact that we've seen a very significant reduction in profitability from our Latin American business as a result of the weaker Brazilian RAI, we have still delivered very significant operating profit growth in the period. We have a strong order book heading into the second half of the year, particularly within our soil nutrition and animal nutrition business, and I think we're well set for the key spring application window in the Northern Hemisphere. Our living landscapes business continues to see strong organic growth and has been further boosted by acquisition, and that's bringing diversification and less volatility to earnings across the group, as we saw within the full-year results for FY24, and again evidenced in the performance of the first half of 2025. And the balance sheet that we have now, while we've returned to, I suppose, a more normalised leverage level at about 2.5 times EBITDA at half-year, we believe that we still have the capacity and I suppose ambition to continue to grow the group out into the future. In terms of what's ahead, we intend maintaining our disciplined approach to capital allocation and driving shareholder returns out into the future. As Colin mentioned earlier on, we are likely now to see lower capex in the medium term as our ERP investment program commitment is significantly lower and most of our specialist product capital investments conclude. So that investment in strategic capex, I think, will fall in the coming periods. We do continue to see ourselves investing in more margin accretive, organic and M&A growth. That diversification of the business into living landscapes has certainly been key in reducing the earnings volatility that has come about historically because of weather challenges, particularly within our Ireland and UK segment. It complements the organic growth strategy within the group and it broadens our exposure and offerings within the emerging nature market. our nature economy. So we're happy with the progress of living landscapes to date and we continue to see continued investment in that sector for the foreseeable future. So that concludes the presentation this morning. I think we're happy to open it up to questions and answers now. If, Sergei, you could please open up the lines for Q&A.

Certainly. Ladies and gentlemen, if you wish to ask a question at this time, please signal by pressing star 1 on your telephone keypad. If you wish to cancel your request, please press star 2. And please make sure the mute function on your phone is switched off to allow your signal to reach our equipment. Again, please press star 1 to take a question. And our first question is from Patrick Higgins from GoodBody. Please go ahead.

Thanks. Morning, everyone. A couple of questions on my end, if that's okay. Firstly, just on the living landscapes business, you know, clearly compelling kind of consolidation opportunity there. Maybe could you just elaborate on, you know, what's the right near-term opportunity for your expansion into Western Europe? Like, where do you start in terms of products and services? What, you know, market or country makes sense to kind of initially expand into? Is it just, you know, opportunistic or is there anything that you're looking for that kind of initial expansion? And then the second question is just on, you know, the soil nutrition demand backdrop. You know, the demand for the feed nutrition business makes a lot of sense. Just interested to hear on the soil side, what's driving, you know, that strong demand dynamic? Is it just lower level application in previous years and now, you know, farmers are more likely to apply given the lower first price or anything else you might call out there. Thank you.

Okay, TJ, go ahead. Thanks, Patrick.

Regarding the M&A opportunity in living landscapes, having completed four acquisitions in the first half in the environmental space in the consulting space, we are still in the integration, just consolidation of those businesses. So our immediate focus on the mainland Europe basis is more in the product and applied services space. I mean, we are looking at a number of markets. I mean, in the product distribution space, the characteristics in terms of the fragmented nature of the market is quite consistent actually across those developed markets. So we've got discussions running in a few different markets. I suppose it's understanding where the appropriate profit pools sit and where there's alignment across the product portfolio in particular. They're the, I suppose, the relevant points that we're considering in the assessment of those businesses. We're also looking at multiples of course, and discipline on multiples is just an ongoing piece for us. And the other piece, obviously, with any of these businesses that we're bringing into the portfolio is fit and cultural alignment. And we have experience of walking away from businesses where that cultural fit and alignment isn't right because that is really very much a table stakes piece for us, as is the multiple point. So, I would say the M&A hopper is is very active, as Sean mentioned. But again, I suppose our approach of being patient and prudent in terms of those key criteria, I think, serves us well. And we'd hope to be able to progress on some opportunities over the coming months.

I'm sorry, what kind of multiples are you looking at in that living landscape business? Is it five to seven times?

Yeah, I suppose we've spoken previously about five to six times multiple, consistent with our own EV multiple, Patrick, obviously maintaining that internal discipline, I suppose, is an important piece for us. Would we run up as far as seven times for the right acquisition? I think we would, but again, we will maintain the discipline, I think, and be patient. So five to six times is how I think about it, and in the case of something that was particularly attractive where we saw a particular strategic fit, we may run up that to seven times.

Patrick, on your question on soil nutrition, a couple of aspects to it and vary by market actually. Ireland, in addition to strong demand within our animal nutrition business, the fodder challenges that were experienced towards the tail end of last year also drove reasonably strong fertilizer demand in the first half of the year in the Irish marketplace. And then a supplementing, I suppose, factor was an increase in fertilizer prices really from January onwards. So globally, the markets have moved upwards reasonably appreciably in the first couple of months of the year and that drove an additional level of demand within the Irish marketplace. So fodder and grass growth I think being the first kind of driver of that demand and then price movement upward since Christmas being the second driver. Within the UK business while volumes were down in the first half they weren't significantly down. And again, there's been an element of farmers taking what's called a P&K holiday and applying a lot of straight nitrogen over the course of 2022 and 2023 when fertilizer prices were really at very, very high levels. So there is a P&K deficit on farm across the UK and we're seeing some element of fertilizer application trying to address that and in addition to that then I suppose the other key driver of demand in the UK is the increased land mass being seeing I suppose an increased winter cropping area and finally then the improvement and movement upwards in fertilizer prices since Christmas so Dermot Luddy, kind of a number of key drivers, but certainly since Christmas that movement upwards in fertilizer prices, mainly as a result of the movement upward in gas and energy prices. Dermot Luddy, across Europe has probably been the key driver of demand and the build of a very strong order book now coming into the spring application window.

Dermot Luddy, Thank you very much.

Thank you. And our next question is from William from Berenberg. Please go ahead.

Yep. Morning, guys. Thanks very much for the presentation. I guess building on the first question there, I guess slide 23, you've got that product focus and services product or service focus markets. I guess what's the current split at the moment and how should we think about that split going forward given the larger TAM in the surface focus portfolio? Second question, again, relates to living landscapes. Obviously, you've got that target of 30% operating profit contribution. What sort of level of leverage would you be happy taking the business to in light of that target? And then finally, just as we look beyond 2026 and sort of the M&A strategy that you've outlined, I guess, could we be looking at a business where actually 50% of adjusted operating profit is coming from living landscapes?

Thanks, Will. I think in terms of the state on page 23 between applied service and product and distribution, I suppose in terms of our focus is, as I said, on the consulting side, we're consolidating what we have right now for the next number of months. Our focus is primarily on the product distribution and applied services space. In terms of the weighting of the pipeline of M&A, it's probably slightly more skewed to the product distribution side, I would say, because it is, I suppose, the nature of the products, as you see listed there on page 23, there is a heavy crossover with our current product portfolio in our current businesses in the UK. So I suppose instinctively our knowledge of those businesses and products is a little bit closer in. That said, when we look at areas like habitat creation and restoration and the vegetation management spaces, there are very interesting opportunities equally across mainland Europe in those areas. Habitat creation, as I said, is relatively close into us in that we provide those services across the Keystone businesses and certainly see, again, aligned with the backdrop of legislative and regulation changes across mainland Europe, see increased opportunities in those spaces across those markets. So I would say the M&A hopper, if you like, at the moment is going to be slightly more weighted on the product side, but equally there are opportunities in the applied services space in those two buckets in particular, vegetation management and habitat creation that are of interest to us. I think in terms of your question around the scale of the group in terms of your 50% of the group being living landscapes out over the next period of time. I mean, that's difficult to call. I mean, it comes back to, I suppose, M&A, by definition, as you know, is about having willing sellers at multiples and culture fits that are right and a strategic alignment that's right. And that's a process that, as I said, does require some patience. So I think calling... whether or not we'll be at 50% of the group in a few years' time is probably a bit premature. I think we've pointed to 30% of earnings, at least at an exit rate, by the end of FY26 has been something that we're targeting. We think that's doable. And beyond that, I think we have to just wait and see. And obviously those acquisitions, as and when they happen, need to be integrated and deliver. And as I mentioned in the presentation, you know, focusing on synergies is a critical part of this as well, right? Driving the internal synergies across the portfolio of living landscapes, as well as building those interconnectors into the core agriculture businesses is a key focus for us. So I think plenty of work to be done, and we'll continue to drive to grow the living landscapes portfolio organically and through M&A and beyond that. We'll see where we end up in terms of the overall percentage splits.

Colm, do you want to take the question on leverage?

Yeah, I will. I guess from a leverage perspective, I suppose maybe just a couple of points. As I kind of touched on earlier on, we're largely through all our sanctioned payments now. So we're seeing our working capital and our average debt and net debt at the kind of peak time stabilizing a bit more. So we've got a bit more visibility on that. Obviously, we're conscious that things can move around and pricing dynamics and all that kind of thing can happen. So we're very conscious of that. But obviously, we've recently renewed our credit facilities, which gave us an additional 40 million on top of the 400 million that we previously had. So we have increased headroom there should the right opportunity come along to allow us to invest. And obviously, any acquisitions that come in come with EBITDA as well. So from a covenant perspective, we'd be comfortable that we can manage that. Obviously, our guide is to try and keep to within two and a half times that our kind of peak, but obviously we can extend beyond that for the right opportunity. I think as we look to kind of towards the end of the year, we're probably coming back to more that kind of one times EBITDA towards the end of our full financial year. So again, we have our peak around now, but getting back to more normalized levels by the end of this year. So we've got the capacity there if the right opportunity came along.

And then, finally, William, the question you had in relation to beyond 2026, how much of group profit does living landscapes form? I mean, I think we'd be reasonably comfortable that we do intend to grow living landscapes beyond 2026. Yes, we could see it becoming 50% of group profitability ultimately, and continuing the momentum and growth in the group. Our agricultural operating margin has tended to be 3.5%, 4%. We see the living landscapes operating margin being a high single-digit operating margin, so the opportunity to improve the operating margin of the group by changing that mix from agriculture only to a greater mix of living landscapes and agriculture we think is important. So the group overall should see an improving operating margin profile over time. The businesses we're buying are typically lower working capital businesses and therefore they should allow us to continue to have a flywheel of acquisitions and accelerate acquisitions because we're not committing as much capital to working capital within the portfolio and within the borrowing capacity that we have and the organic growth rate within the businesses we think will be on average faster than the agricultural portfolio so We would hope that the acquisition of more living landscapes businesses ultimately would become kind of self-fulfilling or self-generating while not dismissing the importance of the cash generation and profitability within the agricultural core. Thank you.

Thank you. As a reminder, to ask a question, please signal by pressing star one. And our next question. And our next question is from Michel Bombelli from TPI Cap. Please go ahead.

Can you hear me? Can you hear me?

Yes, we can, yes.

Okay, perfect. Yeah, good morning, everyone. Michel Bombelli, TPI Cap from Paris. Congratulations on the results for us in first and first. Many questions have been already asked, but I would like to get some color on one point. You seem to be shifting more towards services to diversify away from the agricultural product market and reduce earnings volatility. Given the strong performance of the Living Landscape Division, could you share which geographies you're focusing on for this division in the coming years? And will your M&A strategy be oriented toward expanding this segment? I would say I was also wondering if you see potential in the U.S., even though the current geopolitical environment is not particularly favorable for globalization. But yeah, any countries in mind for Living Landscape? Thanks so much.

Michelle, thanks for the questions.

In terms of our focus, we have in the sports and landscapes businesses, we have relatively strong market positions in the UK. That said, there's still opportunity for targeted both on activities in the product space in both those businesses in the UK, so that continues to be an opportunity for us. As I mentioned, equally we see opportunities where the propensity for spend in these areas, both at a domestic and state level, are higher, are the markets of interest for us. When you look across the Nordic markets, down across the Benelux, we see a particular match between the propensity for states to spend in these areas and also on the types of businesses and products and service opportunities that we see. And equally, when you run down through the Iberian Peninsula, we also see similar types of opportunities. I guess, you know, some of that is informed by the relative state of health of public finances and markets such as France and Germany are somewhat challenged. And indeed, you could say the UK is somewhat challenged. equally, but we have an embedded strong position there. So that, you know, prevents a bit more opportunity for us, we would say, in terms of just, as I mentioned, bolt-on or product and service type businesses in the UK market. So I think I would think about it in the context of Nordics, Benelux, and then Siberian Peninsula as particular parts of the market that are of interest for us.

Thank you. Thank you. Thank you. We will now take our next question from Kahal Kenny from Davie.

Please go ahead. Good morning all and thanks for taking my questions. First one is on FIRT, just interested in an update on the infantry position either on farm in the UK and within your own supply chain. Secondly, a related question around the UK, just some comments or commentary on farm confidence. And finally, just going back to living landscapes again on M&A, as you look into Europe, should we anticipate that the size of the deal in Europe, relative to what you've done to date in the UK, will be more significant? There might be questions. Thank you.

Thanks, Paul.

Maybe I'll take the first two questions. So, you know, inventory on farm. i would say in the uk is is reasonably low so stocks are um exhausted um on farm in the uk largely as a result of the higher prices that we saw over the last couple of years so i think you know farmers have have not been building any stock on farm uh within the um fertilizer market um our own inventory levels really are matched to the order book. So between inventory on hand and those shipments which we're anticipating delivery of in the coming weeks and months would really be matching the order book of sales that we have. So we do have a reasonable ramp up of inventory within both our Irish and UK fertilizer businesses. And as you know, in order to prevent any surprises in terms of price movements in the global fertilizer markets, we try to maintain a reasonably balanced book of inventory on hand and our sales order book at any one point in time. Just as an aside, the Latin American market has clearly been through a very challenging inventory clear out at retail level. And we think we're probably coming to the end of that. So the prospects for the second half of this year and into next year are much better. We've certainly been through 18 months of very challenging inventory clear out at retail level, which I think has resulted in some of the pricing pressure evidenced in that market, but we feel we're at the end of that. So that's just an aside on the fertilizer front. In relation to the comments on farm, I think really Grain prices and oilseed prices are a pretty big contributor to farm sentiment, notwithstanding that there's a lot of noise as well about the inheritance tax change in legislation in the UK. So the UK farmer at the moment is probably pretty disgruntled and not feeling too good about themselves. I think that's different in Poland, Romania and Latin America. I think, you know, generally speaking, the demand and situation is probably better there. But ideally, we would see an improvement in output prices to try and drive further spend on farm. Now, as you know, from dealing with this in the past, regardless of what the grain price is, maximization of yield on farm is still a key driver of on farm profitability. So, you know, all of our agronomists and, uh, all of the, the sales organization within agri UK, uh, will be hammering home the message that really it's about optimizing your yield in terms of, uh, optimizing revenue on farm as well. So, you know, regardless of the output price, making an investment in yield and optimizing yield on farm, is always a key driver of on-farm profitability and that's the messaging we'll be going out with.

Europe, M&A? Yeah, hi, Cahal. I would say our M&A hopper at the moment is it's a mix of the smaller scale acquisitions, the one to five, and we've got some larger scale targets in there as well in the 10 plus acquisitions. 10 million EBITDA plus range. Again, I suppose it comes down to the sectors that these businesses are in. I think it's fair to say that there is a scenario where we may look to acquire a larger platform type asset in some of those European markets to give us an entry point that's of relatively scale. assuming all the hygiene factors of multiple culture strategic fit are right, that is a scenario where we may take a somewhat more significant scale position in a market. But doing that, understanding what that platform asset creates for us in terms of opportunity to step beyond from that asset into either adjacent categories or into adjacent markets. So that certainly is a scenario that we could envisage. Equally, there's a range of M&A opportunities that have commonality in terms of the specialist product distribution that they do in mainland Europe. And we can see opportunity, for example, to cross-sell similar or complementary products back into the UK market and vice versa from our UK businesses back into those European-based businesses. And again, in that portfolio of targets we're looking at. There's a blend of businesses between the smaller one to three million and somewhat larger, you know, five plus million EBITDA pools of profit. So I guess we're looking right across the range. And as I say, it's about, you know, willing sellers, multiple discipline, cultural faith, et cetera. But there certainly is a potential scenario where we could acquire larger platform assets and use those as a beachhead, if you like, to grow a farm across either adjacent sectors or into adjacent markets.

Thank you. Very helpful.

Thank you, Deputy Verker. We know for the questions at this time. With this, I'd like to hand the call back over to Sean for any additional or closing remarks. Over to you, sir.

Thank you. Yeah, so thanks very much, everybody, for joining us on the call this morning. We're reasonably pleased with the first half outcome, and I think it leaves us in a good position for the second half of the year. We certainly expect to see reasonable operating profit growth from our UK segment and living landscape segment, and we would be hopeful that some of the reduction in profit in the Brazilian business can be recovered in the second half of the year and that our continental European business probably would be reasonably flat to slightly down for the year as a whole. So while we're not giving guidance for the year as a whole, I think we're reasonably well set at this point in time and are looking forward to the second half of the year and reasonably optimistic about the outcome for the year as a whole. So thank you very much, everybody, for joining this morning, and hopefully we'll see you on the road over the next few days. Bye bye.

Thank you. This concludes today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.