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Edited Transcript of TGR.AX earnings conference call or presentation 20-Aug-19 12:30am GMT

Full Year 2019 Tassal Group Ltd Earnings Call

Tasmania Aug 28, 2019 (Thomson StreetEvents) -- Edited Transcript of Tassal Group Ltd earnings conference call or presentation Tuesday, August 20, 2019 at 12:30:00am GMT

TEXT version of Transcript


Corporate Participants


* Andrew Creswell

Tassal Group Limited - CFO & Group Financial Controller

* Mark Andrew Ryan

Tassal Group Limited - MD, CEO & Director


Conference Call Participants


* Michael Peet

Goldman Sachs Group Inc., Research Division - Executive Director

* Paul Buys

Crédit Suisse AG, Research Division - Head of Research and Director

* Scott Ryall

Rimor Equity Research Pty Ltd - Principal




Operator [1]


Thank you for standing by, and welcome to the Tassal Limited FY '19 Results Release. (Operator Instructions)

I would now like to hand the conference over to Mr. Mark Ryan, Chief Executive Officer. Please go ahead.


Mark Andrew Ryan, Tassal Group Limited - MD, CEO & Director [2]


Yes, thank you for that, and welcome everyone. What I intend to do today, and also Andrew Creswell, who's our Chief Financial Officer, with me is I'll pretty much run through the results presentation firstly, and then I'll also touch upon the presentation inside of acceleration of strong growth strategy, so that we cover both of those. You would have noticed we've gone into a trading halt this morning, so I'll go through the context of why we're in that position.

So if we firstly guide to the results presentation for FY '19, and I'll start with Slide 3. Well, we've been really happy to be in a position where we're, again, coming back to everyone delivering another record full year result in FY '19. And that's been across all our financial metrics, which really allowed us to be the leader of growth for customer supply staff, the communities we operate in and, importantly, the shareholders. So we've had revenue up 15.7% to $561 million, our operating EBITDA up 12.6% to $112.3 million, our operating NPAT up 12.5% to $56.6 million. And just reflecting on that a little, our focus has always been on delivering that 10%-plus bottom line growth, which we've managed to do.

Again, this year, it is a focus about something that we're proud of continuing to be able to deliver. We've helped them send themselves back in May and June to ensure growth into FY '20. The volume and size of the fish at the moment is really pleasing with that excellent winter growth heading into FY '20, so it's allowed us to position nicely by coming in at that operating impact level. And I guess, the other pleasing point on this slide is the operating cash flow, which has effectively doubled year-on-year at $89.9 million.

The focus very much this year is to make sure we grew both the top and bottom line and delivered appropriate cash return. I feel, going forward, we're in a really strong position now that we've got the prawn growth coming on, which is only a 1-year working capital cycle, that we can continue to grow operating cash flow while growing our business rather than with December. We've had up to a 3-year working capital cycle, where we've had to fund the growth of the salmon in there and then get the returns later. So I think that's a really good spot for us to be in.

So flipping over to Slide 4, we've had record full year results, as we've talked about, which has really demonstrated the delivery of that core salmon growth strategy we've achieved over FY '18 and '19, so post the 2017 capital raise at least 3,000 hog tonnes of growth, which has been really pleasing that only -- not only doing that, doing that with strong pricing returns and achieving a hog per kilo. We're obviously in that sweet spot that we try and aim for, which is between that 4 and 5 kilos. So 4.4 hog kilo in FY '19 and, at the moment, we're harvesting at about 4.6 kilos. So there's kind of a little uptick at the moment with the size. So in really good space to then to grow from.

We are, what we would say, the leading salmon business, and we view salmon to really drive our seafood credentials to date. And what we're seeing is demand is outpacing supply. We're even seeing that in a global perspective at the moment and saying that export pricing is pretty favorable and hitting where retail margins have traditionally been for fish. So a combination of good exchange rate and good base pricing for the salmon is putting us in a good spot for FY '20.

I think albeit we've achieved that sort of 3,000 hog tonnes of growth each year for those FY '18 and '19, I think it's going to be a more gradual growth curve going forward, which should be good for that supply-demand equation as well, and allows to optimize our margins and optimize the leases that we're utilizing at the minute. So I think what we'll see, and we'll talk about the worldwide coming a little bit later, once we say the worldwide coming, we can really see some good cost reduction initiatives coming through for the salmon business.

So I think the pricing looks fairly stable as I see here. At the [minutes offer], we can get some better returns coming out of that cost cycle, and that will put us in a good spot moving forward. So I think Tassal has invested in prawns, together with our positive salmon fundamentals is really, for us, expected to underpin that long-term growth.

We're big now with prawns. We've really got a well-balanced program in place. We had that[space] geographic and earnings diversification. And you can throw in political diversification there as well into that, which allow us to continue with delivering strong return with the salmon through optimizing our sales mix and pricing, our lease optimization, cost reductions and improvement and adoption of new technologies. What we've done with the feed center in Hobart is quite amazing.

At the end of the day, and to walk away we most of the technology awards out of Tasmania being a salmon company was a pretty good achievement. And now that's allowed us to think about that technology in terms of utilizing that for prawns. And even prawns feed literally 24 hours a day. It allowed us to really optimize the returns coming out of the prawns moving forward as well.

So I think moving on to prawns, we did the strategic acquisition of the Fortune Group with a target in mind, and that target was 20,000 tonnes ultimately. And now we're feeling really confident around the fact that bringing Exmoor Station into the mix has allowed us with a footprint now to get to that target. Obviously, we're still going to get the relevant approvals and kind of make some licenses in place for that, but you'll probably see today the Queensland government has come out and announced prescribed project status for us for Proserpine, which means that they will use their coordinated general process to facilitate a way for us to move through the various approval processes in a coordinated fashion, so that we have one person within government that we're dealing with, and then government will come back through that person back to us. So that we're just dealing with one point contact through this. I'll talk a bit more about Exmoor Station, but that is a great opportunity for us moving forward.

So I think with the prawn business able to provide shorter working capital cycle and continue for better earnings returns would allow our capital intensity. It really will not only support salmon, but it will allow us to continue to grow that bottom line in that 10%-plus category as we look out towards that 2030 target that we always put out there.

I think the great thing about prawns is we believe about 18% of that could come through the signs that we've supplemented what we've done in the prawn business by bringing in both international and domestic experts into our business, but then use all our learnings from salmon to actually have a really powerful team up in Queensland leading the process up there.

So we think with the growth initiatives and the acquisition of Exmoor that really set in place the potential to achieve that long-term production target of 20,000 tonnes. So I think that's a really important point just to emphasize there.

On Slide 5, really a sustainable salmon's been at our core. It's been where we've grown from. Again, I'm incredibly proud to see it today and say that we're got a company come from the 2002 level to the industry to where we see [there's] $1 billion worth of assets in play. And we've done that in a sustainable way, and we've grown every year as we've gone through that cycle.

When I sit here now and say that we've got increased harvest tonnage up to 33,000 hog tonnes. We've got this salmon size at 4.4 kilo. On average, we've increased our sales up to 34,000 tonnes. That's really been a credit to the management team on the farm in order to always produce sustainably and with environmental credentials in mind. And that's where I'm incredibly proud of what we've done is having that in place.

I think flipping on to Slide 6, where we start to talk a little bit more about the next phase of growth, which builds on our salmon success. So we did delay. There is still some salmon growth to combat a much more gradual curve, where we're looking maybe at that sort of 500 to 1,000 tonnes per annum moving forward, which works nicely within that supply-demand thematic. But with the prawn if we're thinking about having that and having the potential to increase that 20,000 tonnes by 2030, that really is then growing at that sort of 2,000 tonnes per annum mark, which, again, because of the shorter working capital cycle and capital cycles, together with the better return, it really puts us in a good spot moving forward.

So we are committed to growing that prawn business with a focus on really accelerating near-term earnings. And we can't do that because of the shorter cycles. And we want to secure the capacity necessary to support that long-term growth, and that's why we acquired Exmoor Station.

So I'll talk a bit more about the strategic benefits to both the growth initiatives in Exmoor Station in a minute. And you would have seen today, and I referred to it earlier, that we've announced our acceleration of our prawn growth strategy and doing a raising for that, which we'll talk about in -- again, later in the conversation.

So if I flip now through because I've got a lot to get through today. I'm going to move through pretty much to Slide 12 of the packages and just look at a couple of things in the financial section to then laid on a bit more about the capital raising. And obviously, we've had strong growth in revenue, and we've been able to do that by responsibly growing our salmon harvest biomass and size. And at prawn, our focus is to make that domestic demand. And we've grown domestic consumption over the last 10 years from your sort of 1.3 kilos of per capita up to 2.6 kilos per capita. So you can see we believe we know what to do to grow -- equally grow the prawn business in that sort of thematic by growing the domestic market per capita consumption. And we've done that by maintaining strong pricing as well and utilizing export to take the balance of our growth.

I think operating earnings growth continues to close. We've got favorable domestic sales market growth and sales mix and pricing. So we've been able to really structure the business well in that perspective, and we've got some efficiency benefits that are flowing through from optimizing that salmon biomass and size. So I'm really pleased about that.

And then referring into that exceptional growth in operating cash flow. So we didn't have to fund the next year class growth to the same magnitude of 3,000 tonnes per annum. And you can see that the cash spend, because we're not spending it on that growth, comes back into the business. And again, with prawns moving forward, we'll see that sort of theme continue on because the growth will come out of a product that's returning in the same new ground. So that's a really good spot to be in.

Flipping on to Slide 13, really good pricing again the cash flow a little bit more. And I've talked about the strong operating cash flow, and that should continue to occur as we move into FY '20. We invested $139 million this year, which was around the acquisition and redevelopment of the Fortune Group, that $33.9 million, and then the balance of that investing cash flow of $104.8 million really set around the salmon maintenance, CapEx of $34 million, some salmon growth CapEx at $46 million and some prawn growth CapEx at $25 million. So that sort of roughly breaks down where we've spent from an investment sense.

On Slide 14, we talked about here gearing ratio and funding ratios. So gearing ratio at 28.2% and funding ratio at 38.8%, which is we look at that and go with the growth that we've got coming forward and the capital spend coming forward. That's why we needed to take the position we did today by going out and raising some money to get our metrics in a position to support that growth, and then gives us great flexibility still within our balance sheet.

And we'll say that the sort of funding leverage moved from sort of 2.2x back to sort of 1.5 is where we sort of end up after the capital raise.

I think the ROA and ROIC are sitting around that 10% to 11%. And that's been, obviously, a fairly consistent price that we've set. So we've been able to grow significantly on the bottom line and grow our biomass and still keep our returns in check, which has been really pleasing. But I do think, moving forward, we should see some higher returns of that to come through because the salmon CapEx -- sorry, the prawn CapEx that we need to spend and the returns are much better than where the salmon has traditionally been. So we should see that to start to have a bit of an uptick moving forward.

So just clicking on now to probably Slide 17, which looks at the strong salmon performance. And our focus has always been on optimizing that EBITDA per kilo returns. And you can see FY '19 over FY '18, we've been able to increase that by 4%.

And even though we've sold 7,000 tonnes into the export market, so we've been able to really focus on some really good efficiency in terms of our productive capacity out of there, and also make sure our sales mix is delivering, improving a little over to the kilo returns.

And I think as we head into FY '20, we expect that thematic to improve for the salmon, obviously, because they're not having to sell as much growth as the salmon, and that we're just optimizing really our sales mix with the export comeback and be redirected into the domestic market.

So we did roundabout 7,000 tonnes of export last year, I can say, for FY '20, probably that being closer to 1,000 to 2,000 tonnes for the rest going into the domestic market. And again, because export margins at the moment are replicating some of the retail margins. And that puts us in a good spot not to try and push domestic market too hard. We can rely on the export market making a reasonable return for us as we sit here at the minute. So we're happy with how that's shaping up for FY '20.

Now flipping over to Slide 19. And we really do think we'd have a successful entry into prawn aquaculture. We do believe that it's 80% the same as salmon, and there is just that 20% nuance difference. You can see by the fact that we're making an EBITDA per kilo margin of circa $6 a kilo, though to salmon, circa $3 a kilo, you can see why it is a financially compelling opportunity to pursue. So I'm really comfortable with that.

And particularly with the export market for prawns actually returned more than the domestic market at this point for prawns. So again, we want to grow the domestic market for prawn because that's where we see some sustainable platform moving forward. And obviously, export markets are always subject to volatility from other exchange rate and/or commodity pricing.

And so we'll use export. It will be a better returning market than it ever has been for our salmon sales. And at the same time, it'll allow us to then grow the domestic market here in a really strategic way without trying to push too much product through the domestic market more. It comes about optimizing opportunities in the domestic market, with export providing a good return and better return in a way offtakes. So I'm really happy with how that's all structuring up. We obviously had to grow the salmon consumption over the last 16 years, and we've done that. There's a lot of learnings from that. We're applying the same learnings into the prawn business.

We know that the retail is under trade with prawns due to that lack of product innovation and consistency of supply. And that's one thing we've been able to bring with the salmon to the retailers. So they trust us in terms of being able to deliver on what we say we're going to do. And it really is for us now to educate the consumers about making prawns an everyday protein choice, and that's through product innovation and, again, consistency in supply.

So we need to get that product on the shelf at a particular price and continually promote around that. It means that consumers get comfortable with buying it once they understand how to cook it or peel it, in this instance, and they get a lot more comfort with it. And we see that retail is going to be the way to really grow the consumption per capita in Australia for prawns.

So I think when we got such a compelling financial opportunity, we do have a way of accelerating that. That's where we feel we it's incumbent on is now to take that opportunity and really deliver on that and doing that with best practice feeding, putting in place a breeding program at the moment. It's wild core bred stock coming in rather than a selective breeding program like we do with the salmon, which once you go through a domestification program, you do get better survival, better growth and better overall yields coming out of the fish.

Fish health is obviously a major focus for salmon, and we'll take that same approach and reallocating that approach with prawn. Looking after the environment and then employing smart farm concepts and technologies like our feed center we've done in Hobart for salmon needs. Effectively, globally, we're globally leading technology that we're utilizing in salmon that we can adapt to prawns.

And given that prawns do feed every 1.5 hours, that provides us with a great opportunity to feed at night, not have vehicles driving around prawn farms and then having to deal with safety issues. We've just got the ability to sit back and automatically feed the fish. And that's why the smart farm concepts are really important for us. And obviously, if we can get twice as many feeds in a day, it's going to lead to better yields coming out of a -- out of the prawns through better size and performance of the prawns.

So flipping on to Slide 20. The prawns only commenced in second half '19. EBITDA per kilo was $6.12. And again, that compares against the salmon at sort of $3.16 a kilo, so in good shape from a returns point. We've gone through our remediation and redevelopment process with Mission Beach, Yamba and Proserpine. And all those farms are going to be stopped this year, so we've got 270 hectares of ponds that we've now been able to get to a point of remediating for stocking and harvesting in FY '20.

And for those that went on the tour, I think what they saw and what has been done is just simply amazing up there. So the scale and then yet the simplicity of the operation, I think, everyone was quite blown away by what a prawn farm -- a modern prawn farm can actually look like. So that has really played in feedback that we've got on that.

We've taken a real risk minimization approach to the development of our prawn business. We were getting some headwinds of maybe some paperwork and the supply of broodstock for our prawns. So as we always do, we try and think a little ahead and bought our own vessel and took matters into our own hands. And so the brood that we've had in has been performing exceptionally well. We're getting great post-larvae from those broodstock, and they're all being ponded at the minute. And the feeling from the guys is that they're really happy with how that's all progressing.

We've recommissioned our hatchery infrastructure at Mission Beach and Proserpine. And as we do, we think about the reason why we've said that we want coverage in totality at both hatcheries, so we've been able to do that. So that if one of the hatcheries, for whatever reason, has a failure, we still have the other hatchery that's able to provide the stock. Because even if you have the best ponds in the world, if you've got no stock to put in there, it's less than ideal. So we've managed to put all that into play, and those hatcheries are performing well.

We realized when we did the De Costi acquisition, which has obviously been a successful acquisition for us, at the start, we probably relied a little bit too much on existing staff and trying to develop them into our culture, where, at this time, we've actually brought the best-practice staff from outside. We're sending our own staff up there as well, and they're employing staff so that they can learn about -- to test our way, basically, that "we can do safely" culture. And I know when we went on the tour up there, we're just incredibly impressed by the depth and the quality of the people that we've been able to put in place. And it did feel that, that was just another Tassal site. So I've got to admit, when you've got the Proserpine at 28 degrees, it's a little warmer than Hobart at 7. So it was a little different, but it was still very much the same.

I think with FY '20, we are targeting around that 2,400 tonnes, which, if you apply that $6 a kilo EBITDA margin, that's going to deliver some strong prawn earnings in FY '19. We did say when we acquired the Fortune Group assets that by -- within 3 years and by FY '21, we'd be at $25 million. So you can say we're going to be well progressed on that in FY '20, and then I'm comfortable with that sort of level for FY '21. So that still remains on track.

And then obviously, if we develop out our ponds by FY '21 to be stocked for FY '22, we can see that being around about 6,000 tonnes. So that's the sort of progression as we go through. And again, it is growing at around about that 2,000 tonnes per annum. That's the sort of context that we want to outline as we move forward here.

So if I go on across to Slide 22, I just want to talk quickly about some of the state-of-the-art technology that supports a more efficient salmon business for us. With the Well Boat arriving late September, early October, that's going to be allowing our fish to be bathed efficiently and effectively, and that will lead to improved fish health and survival, and it will reduce the use of manual labor. It is a very labor-intensive exercise, so -- and what we're noting is we don't have always enough people to be able to do that. So we're trying to bring people from outside in to scale up, to deal with periods where you have heavy bathing so the salmon becomes problematic. So getting the Well Boat in place, we won't have to get to that point. We'll have a well-drilled team that will literally move and do basically 6 pens a day through the Well Boat. So at the moment, on our lease, we can only do 1 pen a day, so that gives you the idea of the efficiencies that comes with using that Well Boat technology.

The Centralised Feed Centre, we have all our pens in the company now under feed, and we're just seeing really good growth and really good feed conversions, too. So we're getting better growth with less feed, so that's a great spot for us to be in.

We're now starting to roll the cameras out in the hatchery so that we can make sure we're optimizing the growth right from the very start. So that's a good spot for us as well so that the bigger we can get the smaller fish it is like compound interest in the bank. If you start with a bigger principal, you'll end up with more at the end.

The seal proof sanctuary pens, they're working well. We want -- obviously, we've got to protect our stock as best we can, particularly for our people, because at the end of the day, we are a people business. And we love the fish but it is really about the people at the end, and that's why we've got to make sure we're doing -- keeping them safe and keeping the fish safe.

We've actually signed off on a Multi-Purpose RAS, which has -- it's called multi-purpose because we'll be able to either scale it up or down, so either get fish up to a kilo and put them to sea or put smolt at existing sizes, so around about that 160 grams to sea.

So if we put fish to sea with the kilo, we think that if we don't add any more leases, we'll probably get an extra 3,000 tonnes of biomass out of our operations by optimizing the leases. So putting bigger fist to sea and turning those leases over more quickly. But if we get something like a new lease or if we get West of Wedge up and running, we can then bring that back to pull in more numbers. So it will be a similar size to our current hatcheries to bigger tanks effectively. So we'll be able to put 4 million fish at 160 grams to sea, or the other way, we can put potentially up to 4 million fish at 1 kilo to sea. So we have that ability to do that. If we're able to get new leases, it could go up to an extra 14,000 -- or provide or facilitate the growth to up to another 14,000 tonnes of fish at sea by putting more numbers.

So we gain more gauge if we use that as either a biomass facilitator for new leases or a biomass optimizer, if you like, for existing leases. So that's expected to cost around about $46 million. And we are hopeful -- we're in approval process at the moment, and we're hopeful to build that over the course of FY '20 and '21 and then completion maybe late '21, early '22.

So with West of Wedge, we're obviously the key partner with the federal government with this Blue Economy CRC to trial a whole lot of technology out of West of Wedge. We do want to be able to sustainably farm out there. And in order to do that, we want to take a very cautious approach because we've seen Storm Bay full of complexities in terms of weather events and the like, so it needs to be -- the fish need to be growing out there and we're really responsible and careful. Why? Because we want to stay true to our belief in protecting the environment and also minimizing marine debris and that sort of thing and keeping fish alive. And so we'll do that in a very cautious approach and use the Blue Economy CRC as a way to get the best minds and the best technologies that are out there and trial them.

So for us, initially, we'll be setting up pens out there that will just be trialed, no fish in them and just see how they respond. We'll have cameras on them and monitor how they're responding. But then, ultimately, the idea is to gradually grow out there with fish in the pens, and we're able -- and we believe we're able to do that.

If I flip to Slide 23, and what I might do with that is -- really, that's carving off the acquisition and the growth initiatives and the funding, so I'll start to move into that realm. Now inside, there'll be a combination. We'll start talking about both the acceleration of the prawn growth strategy together with -- this slide is really -- we want to build on in our salmon success. At the moment, we've got 270 hectares of licensed ponds, with Proserpine being around about 190 hectares. So we've got a really good footprint now to work with.

Today, we're announcing the acquisition of Exmoor Station and the acceleration of a number of growth initiatives that are expected to support that long-term production target of 20,000 tonnes per annum. So over the next 2 years, with the growth initiatives, we're going to invest around about $85 million, which will be directed around the staged expansion across the pond, which will bring on an additional 150 hectares, which is above that 190 hectares, so that will get that up to around about 340 hectares by FY '22.

We also believe Proserpine has the potential to guide to 400 hectares of pond. So we'll do that in the following year, but we'll do that out of our own cash resources at that point. So we believe that the way we've structured this, with the operating cash continuing to grow, that that's where we will be able to fund that growth.

We'll also have the fact that we're going to put in new hatchery and domestication facility so that we can actually ensure it will take -- with salmon, it took 5 years to get a successful program up and running. So we will start that now so that we're -- within 5 years' time, we're able to take from that breeding program. We're using the same geneticist that we've used for the salmon program, so he is very attuned to selective breeding program and what needs to be done. So we're comfortable and confidently getting both increased survival and growth out of the ponds that we have with the salmon. We'll put in place a processing facility up there that's going to be in place by November. And we also want to deploy the smart farm technology to the 3 existing prawn farms, which is at Yamba, Mission Beach and Proserpine farms.

And so we think those 3 farms with related infrastructures -- so if you think of Proserpine, once we get up to 340 hectares and then Yamba and Mission Beach, which together are about 80 hectares, so that gives us 420 hectares of capacity at that point. And I'll talk about a little bit more of that in a minute. That gives us a prawn production of around 6,000 tonnes by FY '22. So that additional 150 hectares, obviously, going to get to approval processes, but some of that were already well progressed, and I'll talk a little bit more about that in a minute. I think we're in good shape to be able to deliver on that by FY '22.

And then we also acquired Exmoor Station for $25 million, which is approximately 70 kilometers south of our Proserpine site, so it is a geographic and biosecurity diversification. So I'm really happy with how that's come up. And we've -- that's going to be a greenfield site. That's presently a cattle farm, and we've sold the cattle to a family up there, continuing to run the farm, and we're getting a net return of about $700,000 of that a year. But that's going to be -- need to go through a whole lot of approval processes, and we're working through how that might look with the Queensland government at the minute.

And that -- if you think about it just from an area point, it should give us the ability to support a long-term production target of 20,000 tonnes per annum. And if we could have done the same thing with salmon leases, where we could have acquired a number of more leases to get the growth, we would have turned our mind to do that. The Queensland government has come out with spatial planning and identified 2,093 hectares on this 7,000 hectare property called Exmoor Station that they're saying they want to support aquaculture development on. So we're going -- if we could put 1,000 ponds on there, that will deliver sort of 14,000 tonnes, which, together with the 6,000 or 7,000 we'll get off Proserpine and Yamba and Mission Beach, allows us to think through how we get and nuance how we get out to that 20,000 tonnes of production. So strategically, it's a very important property for us.

We're -- it initially is a cattle property, so if we cannot get all the approvals, the worst that can happen is we put it back on the market and sell it back. And it will be nothing ventured, nothing gained. But we do believe that it had significant potential because of the process the Queensland government has already gone through and from our discussions with them about the opportunities that fit in that Mackay area.

So moving forward, we expect to generate return on assets and also return on invested capital from our prawn farming assets once they're authorized by the relevant authorities and developed above group's historic levels. So that's where ROA and ROIC have been sitting around about between that 10% and 11%. We believe we can achieve above those levels from our prawn assets and from our total business as the prawns, obviously, upscale to be a greater earning component of the salmon business.

So if I now just really go into the acceleration of prawn growth strategy, and I'll start on -- I won't start on Slide 4 because I've just covered that off but go into Slide 5, which is headed as strong platform in place. I think when we came to the market with our 2017 equity raise, we were quite targeted in what we wanted to deliver from that raising, and effectively, I believe we've delivered on that with strong salmon grade, strong pricing, grow the outsized -- managed to put in place the infrastructure that we've committed to do. So I think with all of that, that positions us really nicely and puts us in great shape now to enter the next expansion into, albeit, a different space. As I've said, 80% of it is the same as salmon. So we can lever off that knowledge in everything that we've been able to get. And I think they keep coming back to the positive salmon fundamentals that sit there provides a really good, solid platform for us to have stability of earnings from our salmon while pursuing higher-earnings, higher-return and quicker-return prawn business. So it's a really nice balance moving forward.

And it means that we're not just relying on the salmon growth. We actually got salmon growth and prawns now. And we have now what you might call a seafood basket, if you like, of offerings that we can bring from financially, strategically, from product innovation. And so we're really pleased that we're in this strong position at the minute.

So flipping over to Slide 7, just to give you a bit of an overview of -- for those who didn't get on the Proserpine tour, I'm sure I'm going to get a few requests following this to get up there and actually have a look at what we're doing up there. And given that it's heavy still at 7 degrees, I'm happy to come up there and show people around across the pond. We are accelerating our investment in prawns. We have increasing confidence to be able to deliver on that. The broodstock has performed really well at post-larvae. It's performing really well on the hatching. As they're being ponded, the remediation of ponds is effectively done. So we've already had a significant amount of Proserpine stock. Mission Beach is now pretty much fully stocked.

So we're in shape now to start harvesting some of the stock at -- in December, which -- so those of you who have been on the salmon journey, that's not normally what happens with salmon. We're waiting another 18 months to get them out. So that's sort of 6 months from starting sort of works nicely for us. And again, as we're trying to grow this in a quicker fashion to be able to still get the same return in the same year, that's a really good spot to be in. I know that some people might think there's a risk in prawns, there's risk in salmon. The very same risks still sit there. It's just that when you're dealing with a $6 per kilo return, there's a lot that needs to go wrong before you start getting down to -- even where the salmon return is at $3 a kilo.

So for us, while we've got stability in the salmon earnings and that it's the right time to actually go and do this, we've got a property that's come up for sale I think once in a generation. So those who know some of those cattle stations up there, they generally held for 67 years within family context. So for it to come up while we're ready to grow, it's one of those things that's meant to be. So for us, we'll pursue that, and we can do that off a really strong platform, which is good.

So I think Slide 7 just really covers off on where we got all the farm sites located, and you can see where Exmoor Station is in context to Proserpine. It also gives you an idea of how big a state Queensland is. When you've got to actually drive around is when you do realize how big it is.

And when you get on some of those properties, you've got Exmoor -- or you've got those that went on the Proserpine, that's a 2,000 hectare property, and Exmoor, 7,000. So like you've got a 3.5x bigger property to get around. So some of those little automobiles we had wandering around Proserpine, we might have to get some faster ones for Exmoor to get everyone about a little bit quicker.

So flipping over to Slide 8, I just want to really run through what we're raising the money for. And if I look at Slide 8, it breaks it down into 3 main components, and I'll talk about each of those in a bit more detail in a minute. So you've sort of got the farming expansion there at $85 million over FY '20 and '21, which means it leads production in FY '22. But equally, that spend in FY '20 will deliver production in FY '21. So it's not spending the money now, waiting 2 years to get a return. They'll be growing about 2,000 tonnes per annum over that period. And it really is about -- with Mission Beach and Yamba already at 80 hectares of ponds, that really is about Proserpine and the further development of that by an additional 150 hectares, and I'll talk a bit more about that in a minute.

And combined with the smart farm technology, which is really around feed performance -- fish performance from the feed, and cost efficiencies and lower power costs, we'll create some really good returns coming out of the combination of the expansion and the smart farm technology. And then obviously, Exmoor Station, which we've funded by a separate facility for $25 million. So that's sort of the breakdown of our growth strategy over the next 2 years from a capital perspective.

So flipping on to Slide 9, this really covers off on the strategic rationale, which I think everyone's saying, really, that third point, that favorable economics. And I think how we thought about prawns is very much the same in salmon. We've got a competitive advantage with salmon by being the leading salmon player, and we say it's the same competitive advantage in prawn by being the leading prawn player. The great thing about prawns, we can lever off all the knowledge that we've acquired from salmon over the last 30 years. So that's -- in the aquaculture world, in any primary production world, that's not to be underestimated, those learnings that we can now apply into the prawns.

So if I flip to Slide 10 and just look, really, at the Proserpine expansion, that is the key component to allow us to get to that 6,000 tonnes by 2022. It is about being able to deliver a potential extra 150 hectares of pond. We've just received Prescribed Project status from the Queensland government, so they're announcing that today. And I think the premier there is doing some media around that today. So they see this as a big deal. They want to be the aquaculture capital of the world. If I'm the aquaculture capital of Australia, I'm just as heavy.

So I wanted the premier to play it down, but I'm happy if we just get to the aquaculture capital of Australia out there. And obviously, by us, I think the Queensland government sees us as the credible player with which that they can facilitate a process like that. So I think it works for both parties in this instance to actually give the prawns a really -- a good gallop there. And what it does is it will facilitate other opportunities. And we know that in Tasmania, where we have for every direct employee, there are 5 indirects. Because we're in the rural/regional areas of Queensland, we'll see the same sort of community fabric that's developed out of that.

So that's been, for us, where there are a lot of fly in, fly out from the people have been displaced out a mining, and that's sort of been -- it's really good to go back in that community and offer opportunities. Some of the people that have gone to work there are mid-30s, and it's the first time they've actually been able to work at home basically. So that sort of things really, that's fantastic for communities. And we're really pleased by being able to get out there and work with closely, the (inaudible) shire up there because the council up there has been exceptional and they're supportive as well.

So with that Prescribed Project status, we can facilitate a coordinated, comprehensive and timely consideration of the projects that we're already seeing that with stage 3 -- for stage 3, which is an 80 hectares of ponds. We're really in the final stages of approval there through the Queensland government. So that's looking good to hopefully commence further construction of ponds in the next few months, which should be great. We then split stage 4, which is a further 130 hectares to take it out to that 400 hectares into 2, one is 70 hectares of ponds, which is tied around constructing in FY '21 and then production in FY '22. And obviously, that will be part of the $85 million expansion plan. And then targeting a further 50 hectares of pond for construction FY '22, with production FY '23 from our future operating cash flow. So the broodstock facility and domestification is going to be really quite fundamental for our long-term growth but in the interim, it's developing at these ponds and continuing to grow the market around about that 2,000 tonnes for us, which is going to be important.

So we move over to Slide 11. You have a picture there of how we feed our salmon in Hobart. So that building is in Hobart, and it feeds all our pens throughout Tasmania. So we've got a number of screens and people working there and remotely feeding the fish. And we've been seeing some excellent performance come out from feed conversion growth and now starting to really see some cost improvements from that. And what we've seen with prawn farming, it probably is where salmon farming was 10 years ago in terms of technology, so we know we can fast track a lot of that from what we've learned with salmon, so the smart farm will comprise 3 really key stages, which is automation, enablement and live data capture and monitoring. So you're having cameras looking and seeing now the prawns respond to their feeds, so that we can work out how best to feed them and then making sure oxygen levels and nutrient levels are -- the requirement -- required levels within each of the ponds. Then I'll move to centralized and automated feeding, which, for us, like we're doing in Hobart, we will set up a platform and whether that is in Queensland or whether that is even in Hobart ultimately because of the way technology is, we'll be able to facilitate that centralized and automated feeding, and then really moving on to a systemization of prawn farming operation. So that will probably lead to then much more predictive feeding, making sure that we're getting clear warning signs of seeing when they go and starting to get too warm and aerated maybe be switched on, and all that sort of really smart farm technology will be put in play in that third stage. So we see the financial advantages that we see and the salmon will see and the prawns and increase in the body weight, survival and production capacity utilization, so really excited by that.

And Slide 12 talks about Exmoor Station. Obviously, we've got to go through and get the required approvals, licenses and permits. We don't need to commence any sort of construction there through FY '23. So it is much a longer-term plan it is to put a stake in the ground and to have a footprint that we can utilize. I'd say, in the meantime, we'll scope it out where we want to put up to 1,000 tonnes on maybe 2,000 hectares of the land and then we'll strategically sell off some of the additional land that we don't actually have to carry forward. So I think we're in good shape with Exmoor. It's an exciting opportunity. It had gone through all that spatial planning. So the stuff that we're encouraging the Tassie government to do with the salmon when they want to double the salmon industry but didn't do. We're seeing now from a Queensland perspective because they've gone and done it. They've already garnered the community support. They've already identified areas where they want to see grow and grow for community reasons, for economic reasons and obviously, it's got to be able to grow from then, which we believe we can. So they've actually done an excellent job in identifying areas with which to not just say they want to grow, but actually evidence that they do want to grow their aquaculture interest. So that does put us in a really good spot where we're just not speculating, we're being supported through that process.

So flipping over to Slide 14, and just talking quickly about the financial impact. It's, as you can see, our leverage is around 2.2 at the minute. And immediately after we do the raise, we're sitting down about that 1.5x, so really comfortable with that. So the raise that we're going out with is $108 million placement. And the data of that, you can contact your broker around how you might participate if you want to participate in that, and we're also putting in place share purchase plan for the retail shareholders of up to $25 million, so the modeling that we've done is based on the placement and not the SPP.

So I think, all in all, that I'm happy to open it up for questions now that I feel we're in good shape and really happy with the stock that we sit in today.


Questions and Answers


Operator [1]


(Operator Instructions) Your first question comes from Michael Peet with Goldman Sachs.


Michael Peet, Goldman Sachs Group Inc., Research Division - Executive Director [2]


Just quickly, just on the prawn's capital questions there. The $6 margin, which you're maybe at, I think previously you're talking about $7.50 to $8. I'm just wondering what sort of changed in your thinking there.


Mark Andrew Ryan, Tassal Group Limited - MD, CEO & Director [3]


Look, I think when we start this, the industry hadn't grown, Michael, for a number of years. And that was very unsophisticated in terms of how it went about selling, they used agents and the like. So because it was a low volume, and they were just targeting a specific wholesale market, then you were able to get $8 a kilo EBITDA margin. But what we're saying is because we're going to actually put some marketing support, and we actually got some infrastructure behind it because we actually want to grow the domestic market, we're saying, we just want to -- and also we're cognizant of probably taking a more conservative view forward because I think what we always need to do is deliver on the bottom line is that we feel with all the infrastructure and support and also the marketing we'll need to do to actually drive that consumption per capita. Very much the same in salmon when salmon started off at high $3 a kilo when it was a low volume and not much retail. Then getting that growth, we'll get overall better returns by doing the growth but we will have to spend some marketing dollars and to have some support around driving that growth moving forward.

Now that's not to say, again, it's a bit like the salmon where we're fluctuating between that $3 and $4 a kilo, that's not to say we won't fluctuate between the $6 and $7 or $6 and $8 a kilo over the period. But if I'm -- if we're trying to sort of map out a 2,000 tonne per annum, and we're trying to give a little bit of focus on what sort of returns might come off that, I don't want to set expectations up. I'd say that they're too high. I think it's important to be conservative as we go, as we go through these. $6, I think people can get their mind around. I'm a pretty simple guy, and I find it easier to turn $6 for something and well, rather than $6.30 or $6.50. So I think as we just keep it quite simple then, obviously, we'll try and to optimize that. But also it allows growing a market. And if pricing comes back a bit and costs come up a bit. I think what we've been able to do is throw out a mixed pricing or cost out. We've been able to keep our margins pretty well in check each year, even in periods of strong growth, where normally you'd see probably that come back as you had to reduce price or something like that. So it's just a way of probably allowing it to articulate a growth platform that is both believable and understandable.


Michael Peet, Goldman Sachs Group Inc., Research Division - Executive Director [4]


Okay. Understood. Just on the prawn volume they're 2,400 approximately for this year. I mean can you just take us through how you're going to get that? And is it going to be back-end loaded? What sort of contracts have you been contracting price with key retailers? And how long are they for, if you are?


Mark Andrew Ryan, Tassal Group Limited - MD, CEO & Director [5]


Yes. I think they're all good questions. I think if we start off with the basic thematic of the domestic market, there hasn't been a lot of growth. So I think retail is going to be the way we grow consumption per capita. So there's going to be a big focus from us on that retail. And obviously, we've got those strong relationships, particularly with Woolworths and ALDI from what we've done to date with the salmon, so we'll lever off those, and we've been levering off those. So I think if you said that, not probably through December, the salmon that maybe 50% to 60% of that will go into a retail environment this year and yet it all will be second half-loaded because we really aren't going to start harvesting until December.

So I guess, the good thing about the salmon and prawns as a general rule is salmon will be much more first half generated because that's when we harvest the fish and prawns will be much more second half generated because that's when we harvest the fish. So you could say actually a nice balance in any respect so we might have to add so much of the lumpy first half, second half. It can be getting more towards that 50-50 earnings split over the 2 halves (inaudible). So I think for FY '20, if you said that for the 50-50 split with the retailers, and we're talking to the retailers at the minute and they're -- from our conversations, we're comfortable with that as the sort of as a target. And I think the great thing with what we're seeing with the prawns is a great opportunity in export, where it's not like salmon where it's a lower margin market, it's actually high-margin market in export.

So some people would say, "Well, why didn't you did the export and not worry about the domestic market?" But from our learnings in salmon, where the whole salmon industry started off just exporting and then got to a point where -- when export markets changed or currency changed, they then had to find a domestic market to grow. It's too hard to turn that on. So our view is to grow the domestic market because it gives us stable, sustainable returns, and that's what we want to do. But at times where we can play into exports, we will play in the exports. I think for this year, you'll probably find that 50% of that production will end up in export.

And we've already using the same people that sell our salmon in export side, to key markets being Japan, Hong Kong and China, where they're getting for Australian tiger prawns at $25 to $30 a kilo, whereas domestically, it sits at that $20 to $22 a kilo. So you can see that going into those markets, which are massive markets and markets where pretty much, globally, the vannamei prawns dominates the prawn markets and they're a lower value proposition, so people are always after those higher-value tiger prawns. It's just in other countries, they struggle to grow them because you need a pristine environment, which we've got in Australia to actually do that. So I think we're in good shape with that. If you exported their overflow, then it's more profitable overflow, if you like. And again, trying to get to the point where we grow the domestic market, so that we just had stable returns moving forward. And you don't have that volatility in our results by just relying on export.


Michael Peet, Goldman Sachs Group Inc., Research Division - Executive Director [6]


And just final one on your yield per hectare. It looks like you're looking -- you're targeting 14,000 -- 14 tonnes per hectare on the prawn side. Can you just talk about that in terms of where that sits versus industry benchmarks?


Mark Andrew Ryan, Tassal Group Limited - MD, CEO & Director [7]


Yes. Look, there's a lot of industry players at the moment that are getting anywhere between 10 and 15 tonnes per hectare, depending on where they set up, and you generally find that the farms further north -- so the hotter it is, the better they yield. And so where we've got Proserpine and Mission Beach are now exporting in a good spot where we should be able to comfortably get to that 14 to 15 tonnes per hectare with that smart farm technology in place and with the breeding programs supporting it. So we're comfortable with that. Can it be more? Yes, it can be more coming off those ponds. But again, just want to set some realistic benchmarks. In some places, they've been talking about getting 20 tonnes per hectare, but I'd rather just set it at the level that we know we can get to.


Operator [8]


(Operator Instructions) Your next question comes from Paul Buys with Crédit Suisse.


Paul Buys, Crédit Suisse AG, Research Division - Head of Research and Director [9]


Just a quick one on the salmon side for me. Just to your comments on, I guess, continued expectations for pricing stability. Just wanted to get a sense of what you are assuming in terms of market supply over the next sort of 12 months that underpin your overall price expectations?


Mark Andrew Ryan, Tassal Group Limited - MD, CEO & Director [10]


Yes. Look, I think, where we'll be, you see it, Paul, we'll probably be around about an overall 34,000 tonnes, so fairly flat. On a south perspective for FY '20 over FY '19 levels, but what we see is, I think we did 1,000 to 2,000 tonnes into exports, so we'll say we did sort of circa 7,000 tonnes last year. So I see that coming back into the domestic market, and we've already seeing really good retail growth for that, and we've done a couple of further agreement with some retailers being ALDI and (inaudible) seeing plot around some tonnage there, so we're in good shape for that offtake. But again, if we don't get that growth at the moment, the export markets making retail margins that we're sort of comfortable selling more into export if we need to with better pricing this year than last year.

I think the wholesale market is sort of still sticking around about that $16 a kilo, so that's now stayed there for about sort of 2.5 years. So I think -- is that the new normal? Well, I'd say that it's stuck for 2.5 years, so we're just assuming that will continue to play out. And so I think there feels to be a fairly stable environment. We're now through to the end of August, and it's feeling quite stable. We've had good growth on our stock over the winter, which we've been happy with, but we don't want to do any more than that sort of 34,000 tonnes as we see there at the minute, so comfortable with that sort of level. And just (inaudible) more fish than actually are caught in the water a bit longer then get the growth for next year. So we're not -- we don't feel that we need to push hard this year on changing the goal. But again, just say prawns doesn't pan out the way it should, then we've got the salmon to kick in if we need to. So I think this strategy now, where we've got a bit of flex in the system will serve us much better.


Paul Buys, Crédit Suisse AG, Research Division - Head of Research and Director [11]


And I just, obviously, your competitor's still to report and put up sort of, I guess, their expectations for their volumes. But if there's more volume coming into the market, it sounds like you would see -- and hence, risk to domestic pricing, you would see export as kind of a release valve if need be, is that right?


Mark Andrew Ryan, Tassal Group Limited - MD, CEO & Director [12]


Yes. Look, I think so, Paul. And again because we've got the ability with prawns to have a better earning return from that, then we can get better value out of pursuing maybe some more prawn opportunities than salmon if that comes in, and happy to get. We're assuming most of that growth is out of retail for us, not at a wholesale, and so we're assuming then that if we can get the same sort of margins out of export that we can at a retail, then they should be interchangeable to an extended time. And again, we want to grow the domestic market because it's important to keep that growth going, but if there were some headwinds around that, then that's what we would do.


Paul Buys, Crédit Suisse AG, Research Division - Head of Research and Director [13]


Okay. And then just on to, I guess, on the salmon side, you spoke about West of Wedge and other areas, but just on your comment that the short term, we'll kind of see more gradual supply growth from Tassal. How long do you see that gradual sort of growth largely -- and I guess what I'm getting at is, in terms of new leases, what plant period are you anticipating for new leases to potentially come online? Noting that your Multi-Purpose RAS can either sort of optimize existing production or be a supplier into new leases? What's your medium-term outlook for having new leases come online for you guys?


Mark Andrew Ryan, Tassal Group Limited - MD, CEO & Director [14]


Yes. That's a really good question because outside of getting West of Wedge up and running, which I think a much longer-term proposition. Yes, we're pleased we've got the leases out there, and we've got the ability to go in follow them and gradually get into it and not have too much at risk. Other than that, at the moment, most of the Tasmanian government actually takes a position of really wanting to lead the growth of the industry and not just talk about having -- doubling the salmon industry. And I just don't see where the growth really is there. I look at the map that they put out with a whole other red around it and they go, why, I just can't see -- if you're going to double an industry, it normally means that you're going to double its footprint.

And if you're putting red around a map and don't have a way to facilitate actual growth, I just struggle to see how you get that doubling happening. So I think we'll grow at that sort of 500,000 tonnes per annum, and we've sort of got a plan to do that either through the Multi-Purpose RAS, optimizing leases and mean getting out into West of Wedge, so it'll be a sort of a much more gradual curve, whereas the market setup that it could take probably 2,000 to 3,000 tonnes from it per annum, and then our competitor is growing at the same rate as well. So I think that's a disappointing thing is it's an opportunity miss maybe for the Tasmania, that's an opportunity gain for Queensland.


Paul Buys, Crédit Suisse AG, Research Division - Head of Research and Director [15]


Okay. And the last quick one, probably for Andrew, if he's on the call. Just a very quick one on group OI depreciation. It didn't really move, from where I can see FY '19 too much on FY '18. For the last couple of years, it seems to have been a little bit first half weighted. So just keen to get a sort of a view for how that ramps up, both in terms of CapEx incurred to date and expected CapEx going forward? Obviously, with the rising and the investments?


Andrew Creswell, Tassal Group Limited - CFO & Group Financial Controller [16]


Yes, I think it's probably confused people a little bit over the last couple of years because, to date, most of the marine assets running the depreciation number, it's around 3/4 of the depreciation number sits in that marine space. And so what we do in a pragmatic sense is we actually run a depreciation register which then we take the 75% of that that's related to those assets, and we capitalize it into the balance sheet as part of the cost of the fish. And then we actually release it back out when the fish are harvested. So you get away between the 2 halves because we do harvest more fish in the first half of the financial year, so the release rate for the depreciation is higher.

But I think where people are probably -- there's a little bit of a misalignment in the modeling is because the working capital cycle of the salmon has been over the 2- to 3-year period. You do get a lag in that depreciation coming back out to the P&L. So what we've seen now, where we've had a couple of years of growth in salmon, we'll see the depreciation number start to hit the P&L from FY '20 onwards, so you should see a ramp-up of the depreciation number in '20. In broad terms, it will probably be closer to sort of around that $30 million mark, so you can start to see it release out on the back of the capital spend that we've incurred over the last 1 to 2 years.

Obviously, interestingly, as we move forward with the prawn side because the working capital cycle of the prawns is a lot shorter, you won't see the same time lag in that depreciation. So when we get commercial quantities of prawns and the depreciation on those infrastructure assets starts to run off, that part of the equation will actually run through the P&L a lot quicker, so that the profile will be mixed, but it will change a bit. So hopefully, that gives you a bit of a flavor of how sort of come into account.


Operator [17]


Our next question comes from Scott Ryall with Rimor.


Scott Ryall, Rimor Equity Research Pty Ltd - Principal [18]


I have 2 questions. First of all, could you just talk a little bit more about driving brand and what are the key characteristics, I guess, of prawns, in your mind, that will really resonate, particularly through the channels that you've identified in retail channels? And then, I guess, it's a related question, but can you talk about the barrier to entry on prawn farming? You've mentioned that you get a 1-year turnaround in terms of getting the working capital costs, but we haven't had any real change as you've said in prawn production for quite some time. So why that's in your mind? And what's the risk around other suppliers coming in, given the Queensland government [pushback]?


Mark Andrew Ryan, Tassal Group Limited - MD, CEO & Director [19]


Yes. Look, I think there would (inaudible) I might answer your second question first, is that while in others come in, I think there's a number of factors to consider there. I think one is what we've been able to do with the salmon just hasn't been by good luck. We've developed a lot of IP around how to go about doing this in a way that delivers excellent bottom line returns and growth. And the team that we've had in place doing that has been pretty much with us for the last, at least 12 years of that growth story. So it's been important that we've all been on the same page and been able to execute well on our strategic views, having incredibly supportive board and having incredibly supportive shareholders with which to do them.

There's been a lot of lesson learned, but we've always gone into anything we've done with a really risk-mitigative approach. So we're not -- we don't sit back and go, what if all this works, then it should happen. We actually think about all the things that might provide issues or barriers or whatever and think through how we would deal with those in the cold water days, so that we're not trying to deal and react when issues happen. We've already got a plan to deal with that. And some of that's been keeping additional hatchery capacity so that if we do lose fish, we are able to replace then. It can be making sure that our balance sheet is well structured, so that if we do have a hit, we've got the ability to cover it.

So we haven't relied on always selling into the domestic market and just doing the wholesale market because that's pretty easy to do. We've sort of said, if we're going to grow consumption per capita like we want to do with prawns, we've got to get into retail because they've got the biggest distribution in Australia, they have regular pricing, they can promote, you can advertise, people know where to go to get them. So all of that come with a lot of learnings and focus. And for us, we've developed up this IP of how to go about it, and it's just that aquaculture is 80% the sign that we're going -- where we're able to execute on the prawn by bringing in the prawn expertise in terms of the growing and the genetics and that's sort of being within our existing structure because we're already selling prawns, there are already processing in prawns, we're just getting the growth of prawns now through our stable, and that's what getting into the De Costi business 3.5 years ago allowed us to actually -- allowed us to do, so that we could learn about what were the other species, how would we sell them, how will we price it and what sort of innovation, talk to the retailers there how we might go about it.

So we've got this deep understanding and deep level of commitment around the things that we do. So -- but for us, we also pick the species. It's already a 60,000-tonne market, so we're not trying to take a new species and then trying to grow that from 0, which is an incredibly difficult thing if we try to grow the actual stock from here and then grow the actual market from 0. That's a lot harder to do than -- we actually already have a very solid base market that sit there, it has good returns already coming out of it and that you can access. So for us, I think that -- can someone replicate that? Yes, they could, and they could have over the last 10 years. It's just a lot harder to do. I'd say that Seafarms wants to do something similar, but I've seen that for a number of years now. So I haven't seen the actual production come out of that. What we're doing is we're actually getting the production out of it. So we have a way of being able to move things forward and do them that as we -- as I lead this company, I'm really incredibly proud of how we go about the things that we do to do that.

And I think with the Queensland government, they did do a whole lot of spatial planning and have identified areas for growth. But if you have a look now at what they did, they identified 7,000 hectares. Of that 7,000, Exmoor was 2,000 of our hectares, so the ability now to go and get 1 site and scale it up, Exmoor was the scalable site. In all the other sites, you're going to have to put a number of properties together to get something of scale. And that's incredibly difficult to do because you're going to have to negotiate with the third person related to the third property. You already know what the second person got when they want a little more and it will be a bit difficult and you're holding out for it. So again, it just comes with complexity. So when this came up and it was a decision to stay and it came on the market, and we go, "You know what, this gives us a footprint to our future." We took it. And so I think we learned that from salmon knowing that when the opportunities came up to do various things, we took them. When there's no more opportunity that I can see in the short to medium term with salmon that are going to get that same growth rate, we go -- we set that 3 years ago and go, "You know what, we're going to get ahead of this." And that's what we did. And that's why we did the prawn acquisition in thought all through this.

So again, others could have done it, may do it going forward, but it's not as easy. It's just sort of plugging and playing sort of stuff. And then, I guess, on your question on the actual prawn themselves. One of the reasons that prawns hasn't had to take up that it should have is that it's not heavily in retail. And the reason why it's not heavily in retail is that the retail FX, we advertise country of origin labeling. So what you'd say is and we see this it was a major benefit of salmon, their product has had mainly resonated with people of about clean and green and that sort of thing. Equally, product in (inaudible) doesn't quite resonate from the clean and green theme. So albeit Coles will lead and then and ALDI can get access to supply. It's that actually having to advertise its country of origin labeling that becomes a big barrier for consumers wanting to buy the product.

So all the Australian stuff gets sold and it's sold in Australia because people want to buy it. It all happens at Christmastime because that's as much supply is coming out of Australia. So for us, we know if we can demonstrate the ability to supply it 12 months a year, which we believe we ultimately will be able to do, that the retailers will support that because they want to make sure that they've got stock on their shelves 12 months a year, and they're not having been to come in and out. And then that allows us to get consumers to go buy 12 months of the year and that's to educate around how you twist and peel a prawn. We had the same issue with salmon early days. One of the issues of eating a lot of salmon was around bones and skin, so we gave them a boneless, skinless filler like this stuff like that we're good at thinking through what are all the barriers to people buying and then consuming the product. So again, we've got all that, that we're bringing to bear with this. And we're already in deep discussions with the retailers about how we're going to do this jointly. So yes.


Operator [20]


There are no further questions at this time. I'll now hand back to Mr. Ryan for closing remarks.


Mark Andrew Ryan, Tassal Group Limited - MD, CEO & Director [21]


Yes. Look, thanks very much, everyone. I know that was a long call. We had a fair bit to get through, so I thank you for your time and patience, so thank you.