ALS Limited (ALQ) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the 2024 Annual General Meeting for ALS Limited. My name is Bruce Phillips, and I'm your Chairman. The meeting today is being held in person as well as online via the Lumi platform. For those of you here in the room, we have a couple of housekeeping matters, first of all. Please ensure your mobile devices are now turned to silent mode. Thank you. And secondly, unlike we have end of an emergency, please exit the room, turn left and proceed down the stairs whilst, at all times, following the hotel staff's instructions. I'm advised, ladies and gentlemen, that a quorum of members is present here today. I, therefore, declare the meeting legally constituted and open. Before proceeding with formalities, I'd like to introduce the participants joining the meeting today, firstly, the directors. There have been two important changes to your Board of Directors since we last met. Firstly is Erica Mann was appointed as Independent Non-Executive Director in March 2024. Erica has strong international executive and nonexecutive director experience across complex and highly regulated multichannel and multiproduct environments in top pharmaceutical corporations. Erica is being proposed for election today, and we'll speak to her candidacy later in the meeting. Secondly, I would like to make a special introduction of Mr. Nigel Garrard who was appointed as Deputy Chair of ALS earlier this year. Nigel is also currently Chair of the People Committee and a member of the Nominations Committee. At the conclusion of today's meeting, he will assume the role of Chairman of the Board. Nigel will also address shareholders later in the proceedings. The other independent nonexecutive directors on the Board who are present today include, firstly, to my right, in the end, Mr. John Mulcahy, who is a member of the Sustainability and Innovation Committee and the Nominations Committee. We also have Mr. Siddhartha Kadia on my left here. Siddhartha is Chair of the Sustainability and Innovation Committee and a member of the People Committee and the Nominations Committee. And Ms. Tonianne Dwyer, also on my left here, she's a member of the People Committee and the Audit and Risk Committee and the Nominations Committee. We also have the Ms. Leslie Desjardins, also on my left, who's Chair of the important Audit and Risk Committee and a member of the Sustainability and Innovation Committee and the Nominations Committee. Also, we have Mr. Peter Possemiers, here on the left, he is a member of the Sustainability and Innovation Committee, the Audit and Risk Committee and the Nominations Committee. In addition, today, we have our CEO and Managing Director, Malcolm Deane, who will address you on the performance of the company in FY '24 later in the meeting. Also present in person today are Mr. Michael Pearson, our Company Secretary and General Counsel; Mr. Stuart Hutton, on my right, who is our Chief Financial Officer, and Stuart joined the company in February this year. We also welcome the company's auditor from Ernst & Young, Mr. Brad Tozer; and Mr. Derek Pocock, from our legal adviser, Baker McKenzie. This will be Brad's last AGM with ALS as he retires by rotation as our auditor. We thank him for his expertise and his integrity and rigor during his tenure. And he has served the shareholder interest impeccably. Ladies and gentlemen, as the Notice of Meeting has been sent to all shareholders in advance of today's meeting, I will take it as read. The format and voting procedure for today's meeting will be as follows. First, I will deliver the Chairman's address, followed by a presentation by CEO Malcolm Deane. We'll then proceed to consider the formal resolutions and the financial statements and reports, as outlined in that Notice of Meeting. For those present in the room this morning, I will allow the opportunity for questions prior to consideration of each resolution being considered. For those attending virtually, questions can be submitted at any time. [Operator Instructions] A new page will then open where you will be prompted to enter the details, your details, before being connected. You'll then listen to the meeting on this page while waiting to ask your question. Virtual attendees should note that while you could submit questions beginning now, I will not address them until the relevant time in the meeting. And they will follow any questions that might be received from people attending in person. Please also note that your question may be moderated. And if we receive multiple questions on one topic, they most likely will be consolidated. Finally, due to time constraints, in the unlikely event we do run out of time, your questions will be answered in due course via e-mail or posted responses on the ALS website. Voting today will be conducted by way of a poll on all items of business. For those present, persons entitled to vote on the poll are shareholders, representatives and attorneys of shareholders and proxy holders who hold blue admission cards. On the reverse side of your blue admission card is your voting paper, which details resolutions 1 to 5, which are being put to a poll. If you require assistance, members of BoardRoom registry services are here today to assist you. Please just raise your hand at any point if you require assistance during the voting process. All voting cards will be collected once the formal business of the meeting has been completed. For our virtual attendees, to provide you with enough time to vote, I will shortly open voting on all resolutions. At that time, if you're eligible to vote at this meeting, a new voting tab will appear. Selecting this tab will bring up a list of resolutions and present you with voting options. To cast your vote, simply select one of those options. There is no need to hit the submit or enter button as the vote is automatically recorded. You do, however, have the ability to change your vote up until the time I declare voting closed. I now declare voting open on all items of business. Results of the polls will not be available until after the close of the meeting and will be announced on the ASX and posted on the company's website. Okay, so now to the Chairman's address. Ladies and gentlemen, the 2024 financial year represented a challenging year for global economies and multinational businesses like ALS. The company continued to demonstrate its resilience, operating globally in a high interest rate and inflationary environment, interrupted international trading and with heightened geopolitical tensions and even wars. The Board is pleased to report that the management team has navigated the business very well through these challenging times and is continuing to drive good progress towards our strategic objectives. ALS' unique operating model allowed us to deliver underlying net profit after tax of $316.5 million, a decline of just 1.3% compared to last year's all-time record profit. However, statutory profit was a mere $12.9 million primarily due to the disappointing $248.8 million noncash impairment of our Nuvisan investment. CEO, Mr. Malcolm Deane, will have more to say about Nuvisan in his presentation. Underlying revenue from operations for the consolidated group saw a 6.8% increase over FY '23 with associated organic growth of 2.2%. In terms of underlying EBIT, the business delivered a marginal improvement compared to last year to $491.8 million, and operating margin was maintained above the floor target of 19%. The company paid a total dividend for the year of $0.392 per share, equivalent to $190 million to shareholders, which was at the top end of the payout range of our dividend policy. Performance was underpinned by the continued strength of our 2 largest businesses, Minerals and Environmental, and was supported by improved performances in the Food and Industrial Materials businesses. The company's performance during the year represents a significant step towards the objectives of the FY '27 strategic plan. The group continued also its disciplined and proactive approach to capital management during the year, in line with the updated value creation framework. This framework combines a risk-weighted approach to capital allocation that will protect, extend and expand our portfolio. We believe this framework provides the fundamental basis to help us deliver on our ambition of top quartile shareholder returns over the medium term. Mr. Deane will also expand on this during his presentation. In FY '24, overall capital expenditure increased by 4% versus the previous corresponding period. The group deployed capital for growth, both organic and through value-added acquisitions. It was predominantly allocated to the Environmental and Minerals businesses, in line with the updated value creation framework. The group completed 8 acquisitions during FY '24 predominantly focused on geographic expansion and new service offerings. Capital allocation also supported initiatives to improve existing operations aligned to our strategic objectives. By design, the balance sheet remains strong. As at the 31st of March 2024, the group's leverage ratio was 2.0x with available liquidity of over $520 million (sic) [ $530 million ], including $346 million of undrawn bank facilities. Post year-end, the group acquired 2 life science businesses, York and Wessling, resulting in an increased leverage ratio at the top end of our target range of 2.3x. The group is committed to reducing leverage to the midpoint of our target range, that is, 2.0x over the medium term. Based on the FY '24 performance, the solid financial position of the company and the promising outlook, the Board of Directors declared a final dividend for the year of $0.196 per share, partially franked to 20%, bringing the annual total dividend of $0.392 per share. This is in line with the top end of the company's dividend policy of paying out 50% to 60% of underlying NPAT to shareholders as dividends. The Board also decided to reactivate the dividend reinvestment plan at a 0 discount and providing further optionality for our shareholders and added capital flexibility for the business. Strategically, our innovative data-driven approach in the business continues to provide us with growth opportunities. Our industry-leading testing capabilities, advanced global systems and a focus on innovative technology and reliable data enables us to deliver first-class service to our clients globally. We are positioning ALS for the future by reshaping the portfolio and continuing to deploy growth capital to capture opportunities. ALS remains well positioned to capitalize on industry mega trends linked to increasing regulation, client outsourcing, electrification, a transition to renewable energy and digitalization. Today, we reiterate that the existing strategic targets set for FY '27 remain unchanged. The company is on track to deliver growing revenue to $3.3 billion, growing underlying EBIT to $600 million and maintaining a group margin floor of 19%. In addition, the group still aims to keep cash conversion above 90% and continue to improve the return on capital employed. The group's strong focus on our people, culture of innovation and collaboration provides necessary support to achieve these strategic objectives. This, of course, leads me to our people and, by association, our remuneration strategy. As we compete globally for talent and market share, the Board again reviewed the group's remuneration settings in FY '24 to ensure we can compete effectively to attract, motivate and retain our key global talent. But first, the Board acknowledges the message conveyed by a portion of our shareholders voting at last year's AGM that resulted in a strike against the FY '23 remuneration report. We also acknowledge the primary concerns regarding the level of LTI payments to the former CEO and the use of discretion in relation to STI and retention awards to secure the continued service of 2 key executives who are an important part of our succession planning to ensure that management stability during the CEO transition period. So since the strike, the Board reached an agreement with the former CEO, whereby he forfeited his outstanding rights under the company's LTI schemes. In return, he was awarded a reduced noncompete period that has not adversely affected the company. With respect to the 2 KMP who are granted retention awards, the former CFO left the company in January 2024 to pursue other opportunities without receiving any retention payments. The retention award granted to Mr. Andreas Jonsson, he remains with the company so that retention award remains in place, that will roll off in the next 12 months. Due to the poor performance of our Nuvisan acquisition to date, and in light of the impairment I've mentioned earlier on in that investment, Mr. Jonsson did not receive any STI payment in relation to FY '24. More generally, in FY '24, executive key management personnel, other than the CEO, received fixed remuneration increases of between 4% and 5%. Additionally, one of the KMP received an increase to his salary as a result of market competitive pay review, reflecting a change in scope of his role from a regional role to a global responsibility. The STI opportunity also increased in FY '24 for most of our KMPs from 60% to 70% of fixed remuneration at target. Performance against the financial, strategic and ESG key performance indicators resulted in commensurate STI outcomes for our key management personnel, ranging from 0 to 74% of the maximum opportunity. Solid financial performance in the face of geopolitical unrest and inflationary forces, strong safety and sustainability outcomes and very good progress against key strategic objectives drove the STI outcomes at the higher end of this range, demonstrating alignment between performance and reward. With respect to the LTI program, sustained performance against each of our 4 performance measures, being absolute growth in EPS and return on capital employed and relative performance against our peers and EBITDA margin and total shareholder returns over that 3-year period, resulted in the 2021 LTI awards vesting at 97%. In FY '25, the fixed remuneration for executive KMPs, again, excluding the CEO, will be adjusted in line with comprehensive benchmarking, with increases ranging from 0 to 4%. The Executive General Manager of Minerals' STI target will increase from 60% to 70% of fixed remuneration to align with the other EGMs. In recognition of a strong performance in his first year as CEO, the Board has determined to increase Malcolm Deane's fixed remuneration from USD 910,600 to USD 1 million. There'll be no change to his other remuneration benefits, including the STI or LTI opportunity, which will remain at 70% and 150% of fixed remuneration, respectively. The Board continues to review both STI and LTI KPI targets to ensure they remain challenging and are aligned to the strategic objectives of the company. Nonexecutive director base retainer fees were increased by 4.5% in FY '24, reflecting the CPI increases to remuneration across the group. The Board is seeking approval today to increase the capital of the NED fee pool to $2.5 million to facilitate overlapping directors and accommodate any future fee increases. If shareholders approve the new fee cap, actual fees will be set by external benchmarking at the median level of market comparators. Turning now to the outlook. As many of you will be aware, the company has revised its approach to providing guidance on future performance by replacing specific underlying net profit after tax guidance with building blocks through a combination of annual and multiyear targets and metrics. This is in line with the approach of our peers internationally and many of our ASX listed peers. While professional investors prefer this approach quite clearly, the Board acknowledges this may be difficult to analyze for our retail shareholders. Therefore, as a purely qualitative guide, and subject to normal trading conditions, we guide shareholders to the target of a modest improvement in underlying NPAT and dividends for FY '25. Malcolm will provide more detail on the outlook in his presentation. Finally, this is a day when the Board and management not only report to you, our shareholders, but we also acknowledge and thank you for your continued loyalty and support of our business and its objectives. In return, I'm sure you'd join me in thanking my colleagues on the Board, the management team and, indeed, all of the talented and dedicated people across our company whose excellence and commitment contribute to the success of this remarkable business. As noted last year, I will be retiring from the Board at the close of the AGM today after completing 9 years of service as your Chairman. I'd also like to express my sincere gratitude to you for allowing me to be Chair of this wonderful company. I also congratulate Mr. Nigel Garrard who succeeds me as Chair at the close of the meeting today. I look forward to seeing ALS continue to grow and prosper on his very capable leadership. I now hand over to our CEO, Mr. Malcolm Deane, who will provide further detail on our FY '24 operational performance. Thank you.

Good morning, ladies and gentlemen. I warmly welcome you all to our general meeting. To those here in person and to those joining online, it is my pleasure to have this opportunity to reflect on the year that's been and to share more on our future. First, I want to take a moment to extend my thanks to you, our shareholders, to our Board of Directors and the management team for your ongoing support and collaboration, to the people and their extraordinary efforts, everything we achieved in this company is possible because of your dedication. So thank you very much. And also thank you to our clients, partners and suppliers. Over the next 20 minutes, I will provide an update on the fiscal year '24 performance, the progress towards our 2027 strategy and the shareholder value creation framework. Turning to our performance. As the Chairman shared, we reported solid financial performance. However, there is one area I want to highlight ahead of anything financials, and that's safety. I am proud to say that ALS continues to lead our industry in safety globally. ALS is a safe, best-in-class workplace, proven by the outstanding improved results we show year after year. This past year, we reduced our total recordable injury frequency rate to 0.95, the lowest ever recorded by ALS. This was achieved through widespread safety culture supported by our lifesaving rules alongside our psychological safety programs, safety trainings and visible leadership and commitment to safety. Safe work is our nonnegotiable priority and underpins every other performance measure, including, of course, our financial performance. This past year, ALS again demonstrated that our diversified business model is resilient and equipped to adapt to market changes. As the Chairman shared, we continue to deliver revenue growth and maintain industry-leading margins. Our business delivered overall revenue growth of 6.8% with low single-digit organic growth despite a challenging market and slowdown in mining exploration and overall pharmaceutical activities. The company continues to deliver solid, best-in-class margins, recording a 19% EBIT margin. This was supported by the strong performance of our leading Environmental business as well as Food and Industrial Materials. Additionally, our Minerals business demonstrated a resilient performance, which delivered an outstanding EBIT margin of 32% in this volatile business environment. Our cash generation, balance sheet and liquidity remain strong, supporting the implementation of our capital framework and continued growth journey as we move forward. So let me now share a high-level overview of the performance of each business streams, starting with Commodities. In Minerals, we boosted our market share and managed cost efficiently, driving growth in mine site activities. The Minerals margin was above 32%, reflecting reduced cyclicality due to an ongoing change in the mix of elements we test and services we offer; new products launched, including high-performance methods; and the type of clients we service with a robust expansion into mine site. Global electrification continues to drive revenue growth in our Minerals business. We continue to create lasting value for our clients upstream by offering unique, high-value services that ensure consistency and reliability. This was done with methods that deliver the lowest detection limits with the highest precision. With our culture of innovation, we continue delivering and offering new methods to our clients. This year, we launched a new super-trace gold detection method with the lowest detection limit in the market. Additionally, over the last 3 years, we have seen the business expand its mine site operations with a CAGR growth of 20%, representing an increase in new sites opened of 45%. By the end of fiscal year '24, we had presence at 26 mine sites. The company will continue focusing on expanding our mine site activities for the right locations and clients, offering them our unique solutions. We are excited about the prospect that this market presents for ALS, having become an enabler of the global energy transition. Following with Industrial Materials, part of the Commodities division, we have achieved growth and margin improvement across most businesses. The organic growth for this division was around 13% with volume and market share expansion in all 3 divisions. So now let's move to Life Sciences, which includes Environmental and Food and Pharma. The Environmental division is our largest, representing nearly 35% of the revenue. This division remains a core expansion area, achieving 8.6% organic growth, outpacing overall market growth. Our growth surpassed the market in all regions, and we've strengthened our position through key acquisitions in growth area and further margin expansion. The business has benefited from global standardization, increased use of our unique LIMS and new regulation with tighter enforcement from authorities worldwide. In the ever-evolving landscape of environmental challenges, we have positioned ALS as a trailblazer company that not only keeps pace with the industry trends but actively shapes them. With a keen eye on emerging contaminants like PFAS, ALS has solidified its position as a market leader. Anticipating the significant attention PFAS would garner due to the potential health and environmental impact, we position ourselves as a front-runner in PFAS testing, starting early in Australia and then consolidating our position in Asia, Europe and North America. By investing in cutting-edge technology and expertise, we provide clients with reliable PFAS analysis. Our momentum in key geographies, such as the U.S. and Europe, reflects our strategic vision. These regions face unique challenges related to PFAS contamination, and ALS has risen to the occasion. Collaborating with local stakeholders, we tailor our services to meet regional needs. Whether it's compliance testing for industrial sites or monitoring drinking water supplies, our impact resonates across communities. ALS doesn't merely react, we proactively build capacity. Organic investments such as expanding lab facilities and optimizing workflows ensure scalability. Equally crucial are strategic acquisitions, which keeps ALS ahead of the competition, and we will discuss a little bit of that later today. And finally, within the Life Sciences, I will discuss our Food and Pharma that accounts for 24% of the company's total turnover. Together, the Life Sciences division had seen improvements through market share expansion, enhanced end-market focus and price discipline. We anticipate these factors will continue to benefit the organization as clients increasingly seek high-quality solutions. Regarding the Food division, we achieved rapid recovery in volumes and price growth in Europe helped by a better mix of work and effective cost controls. And finally, the Pharmaceutical division navigated tough market conditions due to reduced drug development funding, and we started the transformation of Nuvisan. Beyond our safety and the financial performance, we embarked on several strategic initiatives as part of our 2027 strategy, so I'd like to focus on 4 of those highlights. First, we achieved carbon neutrality for Scope 1 and 2 emissions, reduced plastic waste and expanded solar energy use. Second, we increased employee engagement and inclusivity, with over 80% of our employees reporting they feel their work is meaningful in our engagement survey. Our intentional investment in innovation enhance efficiencies and client solutions, setting us apart in the industry. We added 2 leading environmental testing business, York Analytical in the U.S. and Wessling in Germany to strategically fill geographical gaps and expand our service and capabilities in high-growth regions. And we acquired the remaining 51% interest in Nuvisan at 0 cost, securing majority control and creating the best opportunity to deliver earnings growth and maximize shareholder value optionality. We have started implementing our transformation program to increase revenue. We have targeted investments in business development and improved profitability across the Nuvisan business. Nuvisan integration and cost transformation initiatives are on track, and we have started to see positive market movements, especially in the biotech sector, with improved funding and business development opportunities. We expect this to benefit Nuvisan in the future. We have made significant strides in executing our strategy towards 2027. However, we knew we needed to push that work further driven by factors such as a newly formed executive team comprised of long-term and new leaders, a step-up in our efforts to improve the integration of acquisitions, enhancements to our operating model to enable margin improvements, a desire to better scale our businesses, and development of a new approach to capital allocation. As a result, we developed our new value creation framework, which clearly sets the focus of the organization. We believe this framework provides the fundamental basis to help us deliver on our ambition of top quartile shareholder return in the medium term. As you can see on the slides, the first level outlines our refocused risk-weighted approach to growth capital allocation. Capital allocation comprises organic growth, including ongoing implementation of the ALS Way, an investment in innovation and inorganic growth. Our aim is to unlock additional value and maximize returns for our shareholders by prioritizing investments close to the core with higher returns expectations for investments that are in segments just outside or adjacent to the core. Overall, we are targeting disciplined and successful implementation of the refreshed strategy to support mid- to high single-digit organic revenue growth along with steady margin improvements as we leverage our scale and benefit from the ALS Way, which includes ongoing investments in innovation. The second level in the middle of the slide explains how our new strategy aligns the company's capital allocation. When evaluating investments opportunity within our portfolio, we use 3 lenses: the character of the market, the alignment of the market to our portfolio, and the growth potential of the market. It's clear that parts of our portfolio benefits from holding market leadership position in key markets regionally or globally. In this regard, we have identified 4 growth pillars for our business: first, protecting and extending leadership positions in key businesses through a combination of rapid organic growth and inorganic expansion; second, expanding our service offering and market share in selected global and regional high-growth markets to create leadership positions where the business already benefits from a strong presence; third, selectively investing capital into markets through organic growth and M&A that can expand our scale or capabilities; and lastly, seeking to optimize value from underperforming businesses, consistent with how capital is allocated to extract maximum returns. In terms of returns, with this new capital allocation strategy, we are targeting a return on capital employed of 15%. This is measured as EBIT over average capital employed in the third and fifth full year post investment for organic and inorganic capital, respectively. The third level on this slide addresses the company's overall growth profile and shareholder return. Through a combination of returns and organic growth, continued improvements of existing asset base and improved return from the integration of M&A activities, we expect to maintain ROCE in the high teens or above in the medium term. As mentioned earlier, our refresh strategy aims to support mid- to high single-digit organic revenue growth, alongside steady margin improvement and solid ongoing cash generation. When combined with a sensible target gearing range of between 1.7 to 2.3x, we will have the financial strength to invest in our growth ambitions while also delivering returns to our shareholders. I will pause here to reiterate Bruce's comments that we will no longer provide NPAT guidance. Instead, we have started providing forward-looking building blocks commentary. The perspective for the current year have not changed from what was announced a couple of months ago, which includes targeting mid-single-digit organic revenue growth on a constant currency basis. And in that regard, the first quarter trading is in line with this guidance. However, despite positive longer-term macro indicators, organic growth in the Minerals division has been subdued, with volumes tracking in line with last year. Second, excluding acquisitions, we are expecting modest improvements in operating margins for Life Sciences with continued margin resilience in minerals, prioritizing risk-weighted growth between Environmental and Minerals businesses, in line with the value creation framework, and maintaining a strong focus on integration of acquisitions and the Nuvisan transformation program. And finally, we're expecting leverage at the top end of the targeted range after recent acquisitions, with a clear focus on bringing the leverage ratio to the midrange over the next 12 to 18 months. It is important to note that while this is a change to our reporting framework, our longer-term fiscal year '27 financial objectives are unchanged. We have had a strong year with solid performance in line with our commitments, and we face the future with a sharper focus for where we will win and a deeper definition of our competitive advantage to guide how we will win. Within the testing, inspection and certification industry, the opportunity for organic and consolidation-based growth is significant, with key mega trends also supporting our growth outlook. I am confident that we are well positioned for the future. We have an unmatched foundation to build and cultural agility to evolve with the market. We will continue to focus on having the best people, system, technology and equipment to serve our clients with excellence, which is key to us being trusted as the right partners delivering the right solutions. Before finishing, I want to thank you, Bruce, for all the time with us, for your guidance and challenging the management team. I'm sure I'm speaking for all the management team, so thank you very much for your support, and we wish you well. Hope to see you soon again. Thank you very much. And with that, I look forward to sharing future updates, and thank you very much to all of you.

Yes. Thank you, Malcolm. Ladies and gentlemen, we now move to the formal part of the business of the meeting today. As I mentioned earlier, voting is open on each of the resolutions. I remind you that you can change your vote up until the time I declare voting closed. Proxies have been received from 370 shareholders representing 359.4 million ordinary shares, being 74.2% of ALS' issued share capital. That's a record number of votes, which demonstrates the high level of shareholder engagement. Very much appreciated by the Board and management teams, thank you, indeed. As we proceed through each resolution, the proxy votes of that resolution will be shown. On all available open proxies given to the Chairman of the meeting, I propose to vote in favor of all resolutions, with the exception of Resolution 5, which I will vote against. The first resolution is for the election of our new Board member, Ms. Erica Mann. In accordance with the company's constitution and ASX Listing Rules, an election of at least 1 director is required each year. Erica Mann is now seeking election as a Non-Executive Director of the company. Her profile is outlined in the Notice of Meeting and in the company's annual report. Erica was appointed to the Board as a Non-Executive Director in March 2024. She retires in accordance with the company's constitution and, being eligible, offers herself for election today. The Board strongly supports Erica's election, and I now invite her to address our shareholders.

Good morning. Thank you for the opportunity to address this AGM. It really is an honor to present myself as a candidate for a nonexecutive director role at this truly iconic Australian company. My passion for chemistry actually started my career as a laboratory assistant doing research in iron ore export and also uranium enrichment. That was a long time ago. That soon led to a career in the pharmaceutical industry. I worked for companies such as Eli Lilly, also J&J, Pfizer and Bayer. I started in sales and progressed my career through marketing and general management. After a 30-year career in the pharmaceutical industry, I retired as President and CEO of Bayer's Global Consumer Healthcare business with an annual turnover of EUR 6 billion. I also led the nutritional business at Pfizer, which was a global business that was sold to Nestle. I have deep experience in the pharmaceutical sector, having worked in highly regulated, multiproduct, multichannel environments, and I have also worked on 4 continents, and I have gained really good experience over the years in emerging markets. I bring significant expertise in both small and larger M&A activities as well as integration alongside with an understanding of strategy development through trends, and I've also got a strong focus on culture and risk management. I've carefully considered my capacity in this role. I can assure you that I do not accept anything and any responsibility that I cannot deliver fully on. Part of my rationale for joining this Board is a presence of a really good strategy, a highly capable CEO and management team and a Board that I respect. I currently serve on the Board of Kellanova, which used to be known as Kellogg; and also the DSM-Firmenich Board based in Switzerland, a leader in innovation of health, nutrition and beauty. I humbly ask for your support. And in return, you'll gain a director that is engaged, experienced in leadership, innovation and success and committed to driving value. I look forward to a mutually beneficial and productive term, and thank you for your support.

Thank you, Erica. And just to put that in perspective, Erica's last executive role was at a company about twice the turnover of all of ALS. So we're very, very pleased to have Erica's expertise come to the Board. Details of the proxies received on the resolution to elect Erica Mann are now up on the screen. Of those received, and this is a record, we believe, for ALS, 99.97% are for the resolution and 0.03%, against. Are there any questions from the floor?

I have one down here in the middle, just please wait for the microphone.

My name is Paul Donohue. I represent the Australian Shareholders' Association. I'm holding 1.3 billion proxies from 45 retail shareholders, valued at about $20 million. My question is about Erica's capacity. You mentioned you're comfortable with your capacity. But some of those companies you have directorships with. You have 3 overseas ones. Do you find the international travel and time zone differences an impediment that alter your work with ALS?

This one, Michael?

Yes.

I actually don't. Having come from an executive career where I spent a significant amount of time traveling internationally and running a huge P&L, I find it really simulating, engaging and connecting me to the global environment, which for me at a personal level is really important. And as I said, I honestly would not be sitting here if I didn't feel I could do the job to my full capacity, which is what you expect of me. And so I'm committed. I think I have the bandwidth, and I look forward to the opportunity.

Thank you very much.

Any other questions on the floor? No. Okay, moderator, are there any questions online?

Chair, there are no questions online on this resolution.

He said no, I think. It's like Darth Vader in the background, isn't it? All right, let's move on. I'll now move to the next resolution, which is the adoption of the 2024 remuneration report. This resolution will be decided in accordance with Section 250R of the Corporations Act. As outlined in my address, the Board acknowledges the message conveyed by 28% of the shares voted at last year's AGM that resulted in a strike against our FY '23 rem report. For the reasons detailed in the rem report, and again, in my speech today, the Board hopefully has addressed these concerns adequately. We reiterate to shareholders that the Board aims to set remuneration for all key management personnel at levels which are reasonable and designed to attract and retain appropriately qualified people in what is a very competitive global market. In addition, the aim is to provide both incentive and reward to executives and to align a significant portion of executive reward to growth in shareholder value with a view to both the short and longer terms. The reward structure for the Managing Director and the other KMPs and the group are outlined in detail in the annual report. The structure encompasses 3 main elements: first, a fixed salary; second, a short-term incentive over 1 year, which is approximately 70% cash-based and 30% deferred equity component; and thirdly, a long-term incentive, over 3 years, which is predominantly equity-based. Key management personnel must also meet a minimum shareholding requirement. As outlined in the remuneration report and in my address, the directors believe the approach taken by the Board in relation to at-risk remuneration and the outcome for executives in the '24 financial year are fair and appropriate. There has been a good correlation between company performance and shareholder outcomes as evidenced by the underlying NPAT and dividend results despite the difficult external environment during the year. Details of the proxies received for this resolution are up on the screen now. Of those received, 95.8% for the resolution and 4.2%, against. Are there any questions on this resolution from the floor? The Australian Shareholders' Association is ready again.

The hurdles for long-term incentive are based on underlying rather than statutory results, and this means the negative impact of exceptional items such as the Nuvisan impairment are not reflected in the LTI hurdles. Can you explain why you don't use the statutory results for this?

Yes, of course. Look, underlying performance is a measure that virtually all ASX-listed companies and international companies use these days and use for their remuneration outcomes. Statutory profit gives you a distorted view of the company's performance, quite frankly. And you pointed out Nuvisan. In this case, we've made sure that Nuvisan was taken into account in the LTI awards. We actually penalized the employees in that regard. But it can go the other direction, too. For example, many years ago, we sold an Environmental business in China, which resulted in over $100 million profit, which we didn't put in underlying profit because it's a one-off. So it could work both ways, and we just think that it's a better method of rewarding personnel.

Okay. Thank you.

Okay. Any other questions from the floor? I hesitate to ask this, there are none here, so are there any on the website, moderator? Hello, moderator?

There are no questions, Chair, on this resolution.

Someone at the back of the room can actually remark.

There are no questions online.

Thank you very much. I'll go straight to you next time. Okay, the next item on business is resolution 3, which seeks the approval of the increase in total fee pool for the nonexecutive directors to $2.5 million from the previously approved pool cap of $1.9 million. ALS, as you would know, is a rapidly growing company with increasing scale and global complexity. The main reason for the resolution is to allow the Board strategic flexibility in succession planning, in particular, to allow for overlapping terms of nonexecutive directors and the future appointment of more globally diverse Board members. Details of the proxies received for this resolution are now on the screen. Of those received, 95.9% are for the resolution and 4.1% are against. Are there any questions on this resolution from the floor? No. Okay, moderator, are there any online questions on this resolution?

There are no questions online.

Thank you very much. All right. Each has been kind to me on our last meeting aren't you? The next item of business is the approval of the grant of 2024 performance rights to the Managing Director and CEO, Mr. Malcolm Deane. Under the terms of the company's long-term incentive plan, a summary of the LTI plan and the calculation of Malcolm's proposed grant were set out in the explanatory notes of the Notice of this Meeting. As the Managing Director and CEO of the company, the issue of the performance rights to Malcolm requires approval by an ordinary resolution of shareholders. Approval is therefore being sought to make a grant of performance rights to Malcolm in line with the company's LTI plan rules. The shares will vest in July 2027 but only to the extent the performance hurdles are met over the next 3 years. Malcolm will receive these performance rights and be entitled to the issue of ordinary shares at no cost to him, again, if and only if the performance hurdles are met. No loans will be granted in relation to his participation in the plan. The nonexecutive directors strongly support the issue of these performance rights. Details of the proxies received for this resolution are now up on the screen. Of those received, 93.2% are for the resolution and 6.9% are against. Are there any questions from the floor? No. Moderator, are there any questions online?

There are no questions online.

Okay. We're on a roll. We now move to resolution 5, which relates to a conditional resolution to hold a spill meeting or not. This is clearly not going to be required given the vote on the rem report, but we still thought it was important to get a vote from the shareholders anyway. So as I said, this resolution is dependent on a 25% of the votes on resolution 2 being cast against the adoption of the rem report. Details relating to the conditional resolution are well explained in the Notice of Meeting. Essentially, if you do not want the spill meeting to take place, vote against this resolution. If you do want the spill meeting to take place, vote for the resolution. Details of the proxies received for this resolution are now on the screen. Of those received, only 1.3% are for the resolution and 98.7%, against. So we thank you for that support. Are there any questions on this from the floor? No. Oh, sorry, we have one. The Australian Shareholders' Association. Thank you, Paul. You make me feel loved.

This is a comment rather than a question. So the ASA recognizes the efforts made by the ALS Board in addressing the concerns at last year's remuneration report. And our guidelines say a spill like this would have been extremely disruptive to the company, and we would have voted against it.

Okay. Thank you very much for that, Paul. Thank you. Okay, if there are no questions from the floor, moderator, are there any questions?

There are no questions online.

I like the website one, too. Okay, the next item of business is consideration of the company's financial statements for the year ended March 31, 2024, including the directors' report and the report by the auditor that were provided to shareholders in the 2024 annual report. Shareholders are now provided with the opportunity to ask questions regarding those financial statements and reports about the operations and management of the company or questions to the auditor in respect of the audit report. As I've said earlier, Mr. Brad Tozer, representing EY, our external auditor, is available today to respond to any questions in relation to the conduct of the audit and the preparation and content of the auditor's report. Are there any questions from the floor? On the front here, please?

Thank you, Mr. Chairman, and I would like to endorse the proceedings and thank you for your efforts over the last number of years and your stewardship of the company. But I have a couple of questions, which I would like to ask. It was nice to see that the dividend reinvestment plan was reintroduced this time. In the report, it also tells me that the company is heading well to the goals that were set for the short-, medium- and long-term processes there and that the Board were happy with those processes. With that in mind, could I have an indication of the Board of the number of Board members that invested their dividend in the dividend reinvestment plan?

I don't have that information.

No, no. The directors, they could just throw up their hands and say, yes, we did or we didn't. It's a simple question.

Yes, yes. I didn't. I can tell you that. But I also bought about $0.5 million worth of shares during the year.

Yes. Good. Well, I hope that you bought shares during the year and took up the dividend reinvestment as well. So that's fine. But all I'm saying is that they say that we are achieving this progress but they're not prepared to back it with taking up the dividend reinvestment. And I don't understand that the dividend reinvestment plan, it's on, it's off. It's like a [ bright nighty ]. We should really have a situation, if it's going to be on, it's on. If it's going to be off -- but I get all my correspondence by mail. So the first time I knew that the dividend reinvestment plan was on was when I got the annual report and it tells me the dividend reinvestment plan was going to be reintroduced. I think in fairness to the shareholders, if you're going to be turning it on and off, they should be notified well before the dividend date that it's on or it's off, so that they can change their mind if they want because there are people that maybe didn't even know that the dividend reinvestment plan was available to them, that have bought shares and didn't have the option to reinvest their shares. There were people that maybe have been in it. They've forgotten they have been in it because it hadn't been on for a while and they would have maybe liked to have the option to have a cash dividend. And I think that that's treating the shareholders fairly poorly by not keeping them well informed or having it as a continual thing. And maybe a small discount might encourage more of the shareholders to have dividend reinvestment, helps with the cash fund for running the company rather than out of the bank interest. A couple of other things that I wanted to bring up was we talked about statistics, and it was one of the great poets who talked about statistics and lies and all sorts of things. But if we look at the real facts, the profit from 2013 to 2024 went up 39.2%, 3% compounded over 11 years; moderate, okay? Dividend is down 18.5% over 2013, poor results for the owners of the company, the shareholders. Franking credits have also decreased, okay? You talked about having to pay directors more money, okay? We have a cat chasing its tail. Somebody else says, "Oh, well, these directors are getting more money. We need to pay these other directors more money." But being part of a company that you can say, "We took this company from a company that was producing this much profit and the profit has gone up 40% or 50% in our term as a Board member," gives them a higher standing than having an increase in their fees. So I think that we need to be very careful that we're not pricing these people too much. I know that we had directors' fees go up 4.5%. The profit was down for the year. The dividend was down for the year. So the owners of the company are getting less, the people that they're paying to run the company are getting more. So I think that sometimes you've got to stop and think of the long term. And I know we're building a wonderful company, but it's always better to be the most profitable, not necessarily to be the biggest. And I think that you need to make sure that you're heading in the right direction. Thank you.

Well, thank you, George. First of all, thank you very much for your kind words about me, and thank you for the unkind word about the company. But look, I'll just make a couple of observations there. With the DRP, to my knowledge, and correct me if I'm wrong, Michael, I think we've only made two changes to the DRP over my 9-year tenure with the company. We've switched it on is what George is getting to. And we switched it off. It was on when I joined the company. We switched it off. And at the last meeting before I led the company 9 years later, that we've turned it back on. Okay. We'll check all that up. But I think the overall comment here is we'll take on Board everything you said, George, and we'll analyze it, and we'll come back to you with our response. I think, though, I want to make a comment about the fees paid to directors in particular. That's all done by external benchmarking. And as I said, we do a very comprehensive benchmarking, not just in Australia but internationally. And we pay our directors at the median level. We don't pay them above that kind of 50% level. So it's in line with market norms. And if you want talented directors guiding your company and getting these results, then you've got to pay them at least the market rate. The company has a wonderful purpose, and we've managed to attract world-class directors, which I'm really, really proud about, and the shareholders should be proud of as well. But you have to pay them fairly, and that's the principle that drives us. But we will get back to you on each of these matters. It won't be me, but Michael Pearson, our Company Secretary; or Nigel Garrard as chairman. But we do take seriously, as you know, all the comments you've made at the past and more on the present as well. Okay. Thank you with that. Paul?

More questions about Nuvisan. So half of Nuvisan was acquired in October 2021 for EUR 145 million. In 2023, it generated revenue of around $245 million. But then in March 2024, ALS acquired the other half for no cost, resulting in the huge impairment we've heard about. Can you give us some background for those who aren't familiar with that? And you were saying go from being worth $0.5 billion to being worthless in such a short space of time?

Yes. Well, it's 4 years, I guess, since we made that acquisition, it's not that short. But, well, the issue for Nuvisan, when we bought it, it was competitive. There are other companies that wanted to buy Nuvisan as well. We, at the time, thought it was very fortunate that we've managed to [ negotiate ] for that price with the optionality to go to 100% from 49%. After we bought it, though, the war in Ukraine broke out and investor confidence in Europe, where Nuvisan is honestly entirely based, the business confidence in Europe plummeted and particularly for the investment in high-risk pharmaceutical side of the business where you're testing new compounds or new drugs, et cetera, where Nuvisan did a lot of work with. And so that really hurt the top line of Nuvisan's performance. The 51% shareholder probably wasn't as mobile as we had hoped to decrease costs in line with that decreased revenue and you have certain obligations under German legislation for people, so your cost structure stayed high. So you had those sort of situations. And our major customer, Bayer Corporation, had some major financial difficulties. And so when our major customer had some strife, then that's not under our control. So that's why the value of the company dropped. Malcolm did an outstanding job, I think, when he came in as CEO to renegotiate on the 51% option and renegotiate the price for that down to 0. And if someone had said to you back in 2020, I think it was, when we acquired the business, that you could acquire 100% of Nuvisan for AUD 250 million, they would have taken you off that deal. Every major big company on the planet would have taken that deal. So that's where we are now. And as Malcolm said, we're adjusting the cost base of the company, and the transformation plan is going according to plan. There's some encouraging green shoots from the pharmaceutical companies now starting to deploy capital into the pharma area. So it's a long road that we're going to have to track along to get back to the level we want to, but the work is underway, and I think the management team is doing everything right in that regard. Does that answer your question?

Thank you for that. It's great. Second question is a comment rather than a question. I want to congratulate ALS on your sustainability report. I read a lot of them. And it's clear and succinct, and there wasn't a hint of greenwashing in it, for the concrete examples on how you're reducing the carbon footprint, so well done on that. And if anyone at the meeting hasn't read, I recommend it, it's a good read.

Thank you for that. Yes, look, again, the management team and the Board has put a lot of effort into getting into sustainability story and actions in the right place. And personally, I'm particularly proud of the fact that we are carbon neutral Scope 1 and 2 already over the last few years, and we will continue to do that into the future. We've got a great road map to net zero, as Malcolm outlined as well. The management team instigated a wonderful competition within the employee base where they decided that photographic competition about what their sustainability activities are in the company, and I had to put a written piece with it as well. And the response we got from our employees is just phenomenal. And as you see from that report, there's some great stories. And I would recommend to all shareholders to actually read a fair bit of that report. All right. If there are no other questions -- there's one more question from the floor, please?

Thank you. I'd just like to endorse all the previous comments about your handling of AGMs. It has been excellent and a pleasure to be here. My name is [ Norm West ]. I'm a retail shareholder of long standing, that's why I'm sitting down. I'm not going to ask you and ask a quick question. I'd like some comment in the form of information basically. I've noted there that leverage ratio seems to have come into the comment in both your address and print. Could you briefly just explain to a Luddite what does it actually measure in the company? And what effect does it have on the company's financial growth? And if it's going to be terribly important, can you include it in the 10-year summary? That's leverage. The gearing ratio, if I can get it out of the road, it's another one I'd just like to make comment on. And please keep your 10-year summary in no matter what that indicates because I don't think the figure is really important. It's more the trend. But back in 2014, the gearing ratio was 33.9%. And if you have a look at it, you go across for 10 years, in the last 3 years, it's hit 40%. And in 2024, which is 10 years, it's up to 49.54%. I don't think that's the right trend, at least my experience is it's not the right trend. Is that as bad as it gets?

Okay. There are a couple of things there. First of all, thank you very much for that question. With respect to the leverage ratio, that's net debt to EBITDA. So it means our net debt is 2x the EBITDA generated by the company each year. Correct me if I'm wrong, financial theorists. I'm right. Thank goodness for that. Yes, look, that leverage ratio is important. But to give you some guidance on how conservative it still is from 1.7 to 2.3, the bank's covenant ratio, remember it's about 3.25%. And banks are notoriously conservative, as you know. And so our ratio is well below that level. I think shareholders can have some degree of comfort that the Board is taking a pretty conservative [Audio Gap] but that's the style of company. Quite different if you're an oil and gas company, which is my background, you wouldn't have that sort of heightened leverage. But 40% is generally the cap for that sort of business. It changes its courses, of course, but is there anything else, as a CFO, you'd like to add, Stuart?

A more appropriate metric is the leverage. Can you hear me? Sorry, the more appropriate metric is the leverage metric. And as the Chairman has outlined, I mean, our stated range is to be between 1.7 and 2.3. We can sustain a much higher level than that, but we think that's an appropriate posture and stance for us in terms of the risk that we're taking. So at the moment, we're towards the top end of that post the acquisition of Wessling that we completed this past quarter. And we will consolidate on the acquisitions that we have made, including the Nuvisan story, Wessling and York in the coming 12 to 18 months. And during that period, we would expect our leverage to come down towards the midpoint of our stated range, so closer to the 2x, which we're very comfortable with.

Did that answer your question adequately?

Thank you. Yes.

Any other questions from the floor? Okay, moderator, are there any online questions?

There are two questions which have been submitted. The first question is from shareholder, Mr. [ Chris Chen ]. He asks, are there any takeover offers on the table for the company?

Well, the simple answer to that is no. We'd have to declare and disclose that. So okay, we have a very strong continuous disclosure regime within the organization. The news travels fast, and no, we're not entertaining anything like that whatsoever at the moment.

The next question comes from Mr. [ Kevin Daly ]. He asks, I noticed you're being sued by Korea Midland Power for around AUD 650,000 in connection with the coal certification dispute. How does this figure compare to the annual revenue generated by work done for Korea Midland Power?

Look, unfortunately, that matter is now before the court, and it's inappropriate for me to make any commend whatsoever on that. I'm sorry, but that's just the norm.

Chairman, there are no further questions.

Okay. Thank you. All right then, as there are no more questions, this concludes our discussion on the items of business. I now ask our incoming Chairman, Mr. Nigel Garrard, to provide some reflections on his first year at ALS and what the future may look like for the company. Over to you.

Thanks, Bruce. I'll be brief. Next year, it will probably take a bit longer because I'll have to do all of the formal things that Bruce has done. But I joined the Board 13 or 14 months ago. And I must say the last year has been both interesting and stimulating. It's a diverse and somewhat complicated and large business to get your arms around. But after each interaction, either with management or with our teams on site, it's encouraged me even more about the future success of this business. I'd like to thank my fellow directors for their confidence in asking me to step in into Bruce's shoes, and I hope that I can serve shareholders as well as Bruce has over the last 8 years or 9 years as Chairman. I'd also like to congratulate Erica on her appointment today as a director and look forward to her continued contribution to the business. We've heard from Bruce and Malcolm about the state of the business, both last year and as we go forward, and I've got nothing really yet to add to that. But there's a couple of things I'd like to just highlight. Malcolm went through the capital allocation framework and the priorities for the business. And I think one of the key roles as a Board and as a management is the capital discipline and how we allocate that capital on behalf of our shareholders. In this industry, there are lots of opportunities in lots of geographies. And ALS' continuing success will be about choosing the right opportunities to pursue but equally as important will be those opportunities that we choose not to pursue. And once we've done that, it will be about executing with excellence. And the current examples are Wessling and York, which we have settled on in the last couple of months; and Nuvisan, which has been problematic to date. So the focus for the business for the next 12 months, other than the ongoing organic growth, other than the organic strategies that we've got in place will be the execution on those 3 important acquisitions. And I've said to Malcolm a number of times, execution with excellence has got to be the framework that we look at as a business to make sure that we choose the right opportunities and then we execute those with excellence. You as shareholders and us as a Board are, I think, in a very fortunate position that we've got a world-class management team. And Malcolm has done an excellent job over the last 12 months in adding to that. Stuart joined us in February. We've got a new head of strategy based in Europe, and we are attracting and retaining a world-class management team, and that serves us well as shareholders and stakeholders in the ALS business. So what does the next 12 months mean? It might be boring to say, but it's more of the same. We have a strategy to take us to 2027. And that strategy is about growing sales, it's about growing margins, it's about growing our earnings, and it's about ensuring that our earnings turn to cash. I have a saying that I like, which is that cash is king. And we haven't made a sale until we've got the cash. And the earlier questions about leverage and about gearing all come back to the fact that cash is king in this business. And as we have an uncertain global economy, more so than ever, cash is vitally important. And this business converts over 90% of its EBITDA, it's earnings before interest, depreciation and amortization, each year into cash. And that's something we're proud of, and it's something that we are going to continue to focus on. And then it's management's job and then our job as a Board to provide the oversight that we allocate that cash in the best possible way to deliver short-, medium- and long-term returns for our shareholders. The only other thing I think that will change is that you'll see your Board now have more of our meetings overseas. We've gone from a relatively small Australian company over the last 20 years to one where our sales now see more than 75% of our annual sales outside Australia and New Zealand. So we as a Board will be attending at least 3 overseas meetings a year so that we can see for ourselves the sites, meet the people and not just the management team but also the high potentials and the people on the ground because, as Malcolm said, it's the whole 20,000 people who work for ALS that deliver our profit every year. And for us, it helps us as a Board, it helps us understand the culture and the opportunities and also to give our views to our staff around the world in over I think, 60 countries. So it's going to take us a while to get to all of them. But certainly, you should expect to have a more globally mobile Board from a meeting perspective from next year on. But lastly, I'd like to, on behalf of, firstly, the fellow directors and the management team and you, our shareholders, to thank Bruce for 9 years at ALS, 8 years as Chairman. I said at dinner last night, it's a reflection when you leave a business, and I think we all aspire to this, I want to leave the business in a better space than when I joined. And there's no doubt that Bruce has left ALS or is leaving ALS in a much better space than when you joined 9 years ago. So Bruce, on behalf of all of us, a sincere thank you.

Okay. Well, thank you, Nigel, particularly for those kind words at the end there. Look, we will now move to collect the poll voting cards and close the online voting. In 1 minute, I will close the online voting system. So please ensure that you've cast your vote on all resolutions. I'll now just pause the meeting for 60 seconds to allow time to finalize your votes and have them collected. [Voting]

So the collectors are coming around with their boxes now to pick those up. Thank you.