Brambles Limited (BXB) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. My name is John Mullen, and it's a great privilege as Chair of Brambles to welcome you to the 2023 AGM and declare the meeting open. There are copies of the Notice of Meeting and of the minutes of our last AGM in the registration area. Our Company Secretary has advised me that there is a quorum for the meeting, and I propose to take the Notice of Meeting as read. I will start by introducing your directors, and then I'll take you through the process for asking questions. After that, I will present my address before handing over to our Chief Executive Officer, Graham Chipchase. When Graham, in turn, concludes his address, then Scott Perkins, the Chair of our Remuneration Committee, will speak to you about our remuneration policy. When he finishes, I will take you through the voting procedure and then answer questions from shareholders. I'll then move to the formal part of the meeting. So let me now introduce your Board. Joining me here today on my far left is Kendra Banks; Nora Scheinkestel, Chair of our Audit and Risk Committee; George El-Zoghbi; our Chief Financial Officer, Nessa O'Sullivan; and our Chief Executive Officer, Graham Chipchase. On my far right, Priya Rajagopalan; Ken McCall; Jim Miller; Elizabeth Fagan; Scott Perkins, Chairman of our Remuneration Committee; and Robert Gerrard, our Company Secretary. Also with us today sitting in the front row are Debbie Smith and Eliza Penny from our external auditors, PwC. Today's meeting is also being held virtually via the Lumi platform, which allows shareholders and proxies to ask questions and submit votes on the items of business. There are 3 ways to ask a question today. If you're attending in person, you can ask a question from the floor. If you would like to do that, at the relevant time, please approach the microphone, show your green voting card or orange nonvoting shareholder card and give the attendant your name. When the attendant announces you to the meeting, you may then ask your question. If you're unable to get to a microphone, then please raise your hand and an attendant will bring a microphone to you. If you're attending online through the Lumi platform, you can ask a question as a text. [Operator Instructions] Although you may start submitting questions by text at any time from now, I won't answer the questions until the relevant time in the meeting. The Company Secretary will read out questions verbatim on your behalf. Other questions may be moderated. And if we receive multiple questions on the same topic, then amalgamated together. Now we appreciate the time it takes to type in questions. So if we move on in the agenda before you submitted your question, we will answer it at the end of the meeting. Finally, you may ask a question over the telephone, and this will enable you to ask a live question orally. If you dial into the meeting, you will have received instructions on how to listen to the meeting and ask a question. If you plan to ask a question by telephone, you'll still need to log on to the online platform if you wish to vote during the meeting. Although you can submit your request to ask an audio question at any time from now, I will wait until the relevant time in the meeting before inviting you to ask your question. When you hear your name called out by the operator, that's when you may then ask your question. As I mentioned earlier, Debbie Smith from PwC is in attendance and is available if any shareholders wish to ask any questions about the conduct of PricewaterhouseCoopers' audit, their audit report, the company's accounting policies or the auditor's independence. You can ask Debbie a question using just the same functions which I just outlined. We will be holding a poll on all the resolutions before this meeting, and any shareholders attending the meeting in person who wish to leave early may place their completed voting cards in the ballot boxes by the exit doors. And I'll explain the voting procedure then when we reach the formal part of the meeting. So I'll now open the polls and turn to my address. I'm delighted to have shareholders join us here in-person and online today through this hybrid meeting. I'd like to commence by acknowledging how extremely proud I am of what Brambles has achieved during the 2023 financial year. Our teams around the world have worked really hard in improving pallet availability and service levels to keep customers' goods flowing across their supply chains in over 60 countries around the world. At the same time, we have delivered impressive financial and operational outcomes while laying the foundation for the future success of the business. The accomplishments across our ambitious transformation agenda and our fantastic sustainability achievements that Graham will expand on in his address continue to set us apart from our competitors and underpin the long-term sustainability and value creation potential of our business. These benefits are already evident through our financial year '23 performance and supported the delivery of our investor value proposition this year. Total value creation for shareholders was 29% this year with earnings per share growth of 26% on a constant currency basis and a dividend yield of approximately 3%, which was funded by free cash flow generation. This strong profit performance, combined with our ongoing focus on asset efficiency, supported a return to free cash flow after a number of years of significant pallet price inflation. And our attention now turns to driving successive years of sustainable free cash flow generation while growing the business and delivering operating leverage in line with our investor value proposition. The ability to consistently deliver this outcome will be supported by the investments in our Shaping Our Future transformation program. The transformation program encompasses every aspect of Brambles' business and seeks to transform the performance of the current business model while investing to reinforce Brambles as the industry leader and supply chain partner of choice for many years to come. The progress of our transformation has improved the performance and resilience of our business, setting a strong foundation for us to enhance our customer value proposition, improve our commercial business model and drive a step change in asset and operational efficiency. With the financial and operational performance to date highlighting meaningful progress across many of our transformation initiatives, the next phase of the transformation program is focused on building the Brambles of the future. This next phase aims to create and identify new sources of growth and efficiency to increase the resilience and competitive advantage of Brambles' business as well as the value it brings to fast-moving supply chains all around the world. This will be underpinned by expanding our capabilities through digital transformation and improving the customer experience through new technology-focused solutions. Most importantly, as the transformation program progresses, we remain disciplined and flexible in how capital is deployed to optimize value as we continue to test, learn and adapt our approach across all of the Shaping Our Future pillars and underlying initiatives. We will apply rigor and transparency to all transformation investments with trials being a key part of our methodology to stage-gate investments and adapt our plans depending on trial outcomes and the identification of new opportunities. Scaling of investments will be conditional on clear links to value creation and supporting the delivery of our customer and investor value propositions. Graham will provide further details on specific activities during the year as well as the other transformation investments that we are making in his address in a minute. Overall, we're really pleased with the progress to date, and we're grateful for the ongoing support of our shareholders as we transform the business for future success. The Board, management team and the broader organization remain deeply aligned, energized and committed to the transformation program, which we are very confident will generate sustainable value over the long term for our customers, shareholders and employees. Turning then to dividend and capital management. The strong financial performance during the year supported the Board's decision to declare total dividends for fiscal year '23 of USD 0.2625 per share, which represents an Australian dollar equivalent of $0.395 per share. This is an increase of 15% and 22% in U.S. dollar and Australian dollar terms, respectively. The fiscal year '23 payout ratio of 55% is a 2-point increase over the prior year and is consistent with our dividend policy, which targets a payout ratio of 45% to 60% of underlying profit after finance costs and tax. The final fiscal year '23 dividend of USD 0.14 per share is partially franked at 35%. The non-underwritten Brambles Dividend Reinvestment Plan remains in place for shareholders, and shares under the plan will not attract a discount and the diluted impact on earnings per share of the DRP will be neutralized. Final topic I will discuss is Board renewal. In line with our Board renewal plan, we appointed Priya Rajagopalan in November 2022 as a North American-based nonexecutive director. Priya has over 2 decades of experience in product management, marketing and strategy, most recently in digital platforms for global supply chains. Priya brings detailed knowledge and experience of digital-based supply chain product development and marketing. And with her appointment, we have now exceeded our fiscal year '25 target of 40% female representation on the Board. In February 2023, Nessa O'Sullivan informed the Board of her intention to step down as CFO and as an Executive Director of Brambles. And this will take place following the conclusion of today's AGM. Following a thorough process with both internal and external candidates being considered, we were delighted to announce in August that Joaquin Gil, Deputy CFO of Brambles, will succeed Nessa as CFO and join Brambles' executive leadership team tomorrow. To ensure a smooth transition, Nessa will be staying on an advisory role until the 31st of January 2024. And on behalf of the Board, we want to sincerely thank Nessa for her outstanding contribution over the past 7 years. She has played a key role in delivering our strategy and moving our company forward during a period of significant volatility. And we wish her very well on the next phase of her career away from full-time executive roles. We also announced earlier this week the retirement of George El-Zoghbi from the Brambles' Board with effect from 31st of December. His extensive experience in the international consumer packaging goods sector and supply chains has been a huge value to our Board since his appointment in 2016. And on behalf of the Board and Brambles, we really wish to thank him for his contribution and wish him very well for the future. The Board has commenced a process to identify potential candidates to fill the vacancy created by George's retirement. Before closing, I also wanted to call attention to the announcement made today regarding the retirement of Robert Gerrard from Brambles. Robert will step down from his role as Chief Legal Officer and Group Company Secretary in October of this year. Robert joined Brambles in 2003. He was appointed Group Company Secretary in 2008 and has been a steady hand and a trusted adviser to the Board as the business has evolved over the years. And I would like to extend my sincerest gratitude to Robert for his significant contributions to the business, and the Board and I wish him well in retirement. I am confident that the gratitude and well wishes are shared by all my fellow nonexecutive directors, the executive leadership team and the countless people that Robert has worked with over his 2-decade career at Brambles. We'd also like to congratulate our current Deputy Company Secretary, Carina Thuaux, who will succeed Robert as Group Company Secretary when he steps down. Carina has worked closely with the Board since joining Brambles as Assistant Company Secretary in 2014. In closing, our achievements this year, including the significant progress made across the transformation program to improve the resilience of our business, simply would not be possible without our people. We are grateful for the energy and the drive they bring every day to deliver positive outcomes for our customers in uncertain and challenging times. And we would also like to take this time to thank you, our shareholders, for your continued support of our business and for endorsing the strategy we are undertaking to create value. With that, let me now hand over to our Chief Executive Officer, Graham Chipchase.

Thank you, John. Good afternoon, ladies and gentlemen. Firstly, I want to acknowledge our employees around the world whose tremendous efforts have been instrumental in supporting our customers during another year marked by macroeconomic uncertainty, persistent cost pressures and evolving supply chain dynamics. Their unwavering focus on progressing our transformation and sustainability programs has also underpinned the strong financial, operational and sustainability outcomes we delivered in FY '23. These achievements highlight the quality and inherent resilience of our business as well as the structural improvements we've made to better respond to changes in our customers' needs, the cost environment and operating conditions more broadly, which continued to evolve in FY '23. One of the most notable changes to the operating environment has been the improvement to pallet availability during the second half of the year. This improvement reflected the combined benefits of our asset productivity initiatives and ongoing investments in our asset pool. In addition, progressive inventory optimization at retailers and manufacturers saw an additional 5 million pallets return across our network in the period. Importantly, we were able to deploy these additional pallets to remove or materially reduce allocation protocols to improve our customer service, replenish plant stocks to optimal levels and start pursuing new business growth in Europe and North America. Various inflationary cost pressures persist. However, early signs of improvement in the cost and availability of some key inputs, including lumber in all geographies and transport in North America, were noted in the second half of FY '23. Moderating lumber prices have also started to flow through into the lower capital cost of pallets in most regions. While uncertainty remains about the broader economic outlook, including a softer demand environment and how this potentially impacts input cost inflation and overall supply chain dynamics, we are confident in our ability to navigate these challenges. This confidence is supported by early and modest net new business wins, a strong growth pipeline in major markets and the encouraging progress we've made to date across our transformation program. Details of our performance and activities in each pillar of the Shaping Our Future transformation program are outlined in the scorecard on Pages 12 and 13 of our 2023 Annual Report. The benefits of the transformation program initiatives to date have improved the performance and resilience of our business by better aligning pricing with the cost to serve, increasing our operational and asset efficiency and setting the foundation to enhance the value we can deliver for customers over the short, medium and long term. Our investments in advanced data analytics and machine learning have extracted valuable insights from existing and new data sets. These insights have supported more informed commercial decision-making and asset productivity improvements with approximately 10 million additional pallets recovered and salvaged in FY '23. These additional pallet recoveries were a key contributor to increased pallet availability, which has led to early signs of improvement in our customer engagement and satisfaction scores. While these early improvements are encouraging, we acknowledge there are opportunities to further improve our Net Promoter Scores by streamlining customer-facing processes, improving service standards and working closely with customers to unlock areas of shared value, supported by our digital tools and insights. Our digital transformation continues to progress, including the scaling of our continuous diagnostics pilot in North America and our serialization+ proof of concept in Chile, which is expected to complete in FY '24. This proof of concept will determine the feasibility of operationalizing serialization technology at scale and most importantly, the value it can potentially unlock in other markets. Collectively, these pilots and trials are providing valuable data points and learnings as we continue to test, learn and adapt our approach to deploying and extracting value from smart assets as well as develop our pallet identification, tracking and analytical capabilities. As John has mentioned in his address, we remain disciplined and flexible on how capital is deployed, and we'll provide an update on the outcomes of the various digital pilots and trials as well as future investment requirements of our digital transformation. We remain optimistic about the prospects of a digitally-enabled future at Brambles and how the digital initiatives we can pursue can unlock new sources of value for Brambles and our customers. We believe the benefits from greater visibility of our pooled assets has the potential to improve asset efficiency beyond the previously accepted steady state, including reducing the pooling CapEx-to-sales ratio below 17% beyond FY '25. Turning to network productivity. Our pallet durability initiatives have delivered a cumulative 118 basis point reduction in damage rate since FY '21. While our damage rate improvement is tracking below target, it should be recognized that the target was set prior to major supply chain disruptions experienced over the last 2 years. Despite this, we have continued to deliver year-on-year improvements to damage rates and expect to deliver further improvements as global supply chains progressively normalize. The other major network productivity initiative has seen the installation of 22 automated repair processes across our global service center network by the end of the year. We revised our total end-to-end repair process installations down from 70 to 50, reflecting changes in the current operating environment and macroeconomic conditions. In light of this, we are allocating capital to alternative automation projects as well as identifying other supply chain efficiency opportunities, which collectively are expected to support delivery of our FY '25 network productivity objectives. The final pillar of our transformation program relates to sustainability. Following principles of the Circular Economy and promoting the share and reuse of assets, Brambles facilitates a reduction in demand of natural resources. As a global leader in sustainability, we are at the forefront of the transition to a low-carbon economy, which will act as a pathway for Brambles to pioneer regenerative models that restore nature and strengthen society. Our vision to become a regenerative and nature-positive business was evident through the many practical actions taken this year. This includes the expansion of our reforestation initiatives, which support our FY '25 Forest Positive target to enable the sustainable growth of 2 trees for every tree we require for our timber pallets by FY '25. In FY '23, reforestation initiatives enabled a sustainable growth of 3.85 million additional trees in South Africa and actions have already commenced for further large-scale projects with partners in Mexico and Zambia. We also made meaningful progress towards our other FY '25 Planet Positive targets, including a 5.2% reduction in greenhouse gases across scope 1, 2 and 3 emission sources against FY '22 and positive progress against our verified science-based 2030 targets. We are particularly proud of achievements under our Workplace Positive program, which includes safety and gender equity. Our safety improvement -- performance continued to improve with Brambles Injury Frequency Rate decreasing to 3.8 in FY '23. This represents the fourth consecutive annual decrease and a 24% reduction against our FY '21 baseline. Our commitment to diversity, equity and inclusion was evidenced by our increased representation of women in leadership roles, which is now 36%. In 2023, Brambles will also release its first Diversity, Equity and Inclusion Report as part of our commitment to ongoing transparency. Our leadership position in sustainability was also at the center of 2 essential funding initiatives undertaken by Brambles during the year. Specifically, we accessed a USD 1.35 billion sustainability-linked revolving credit facility with pricing connected to performance across 4 key sustainability metrics linked to our published targets. We also issued a EUR 500 million green bond with a 4.25% coupon rate that was strongly supported by sustainability-focused investors. Finally, our progress continues to be recognized externally through industry benchmarks and ESG assessments where Brambles has consistently ranked favorably or as an industry leader. These assessments cover many aspects of our sustainability program, demonstrating excellent performance against our most material ESG goals. Further details of our sustainability performance can be found in our 2023 Sustainability Review, which was released in September 2023. Turning to our financial performance in FY '23. We delivered strong double-digit revenue growth with underlying profit leverage and return to positive free cash flow after dividends despite continuing pallet price inflation. On a constant currency basis, sales revenue increased 14% driven by pricing discipline and improved commercial terms in both current and prior year periods to recover significant cost-to-serve increases. Underlying profit increased 19% at constant currency as strong pricing more than offset input cost inflation and incremental overhead investments to support the transformation program. Of particular significance was the return to a positive free cash flow after dividends of USD 180 million, which represents a USD 398 million improvement from the prior year. This improvement reflects increased pricing to recover cost to serve and the combined benefits of asset efficiency initiatives, working capital improvements and some progressive inventory optimization by customers and retailers across global supply chains. On a constant currency basis, our return on capital invested of 18.5% increased 0.5 points as the underlying profit improvement offset a 16% increase in average capital invested largely due to investments in higher cost pallets to support customers. Turning to the current year. Details of our performance in the first 3 months of FY '24 and how we are tracking versus our FY '24 guidance will be provided at our first quarter trading update, which is due to be released to the market on Thursday, the 26th of October 2023. In summary, we are proud of our operational, financial and sustainability achievements during the year. As a business, we've made great progress to strengthen the resilience and performance of the business as evidenced by our accomplishments in FY '23 while focusing on building the Brambles of the future. We are committed to executing our transformation program to deliver a step change in the value we can create for our customers, employees and shareholders and realizing our ambitions of pioneering regenerative supply chains. Thank you. I'd now like to hand back to John.

Great. Thanks very much, Graham. So I'd now like to invite Scott Perkins, who is the Chair of the Remuneration Committee, to outline Brambles' remuneration policy and the structure of executive remuneration. Scott?

Thank you, John, and good afternoon, ladies and gentlemen. At Brambles, we have a remuneration structure and set remuneration levels to ensure we can attract, retain and motivate high-caliber executives and talent throughout the company. Our objective is to align executive reward with the creation of sustainable shareholder value and align executive behavior with Brambles' strategic objectives, our Code of Conduct, shared values and risk appetite. Remuneration is divided into 2 components, being fixed and at-risk remuneration. Fixed remuneration is not directly linked to performance, whereas at-risk remuneration is variable and directly linked to Brambles' performance. At-risk remuneration, in turn, has 2 elements. The first is short-term incentives, STI, half of which are received in cash with the other half being received in deferred share awards which vest 2 years from the date of grant. The second is long-term incentive, LTI, share rights, which vest 3 years from the date of grant, subject to the satisfaction of performance conditions but remains subject to a further 12-month holding lock period. Half of the long-term incentives are subject to financial metrics performance conditions, and the other half are subject to relative total shareholder return performance against 2 external indices. As part of its review of 2023 remuneration outcomes, the Remuneration Committee carried out its annual assessment of any behavioral events or incidents which occurred during the year that might warrant adjustments to all or part of an executive's incentive-based remuneration. I'm pleased to report that no such incidents or events were identified through that process. The Remuneration Committee also carried out its annual remuneration strategy review during FY '23. We reviewed executive pay in comparison to appropriate benchmarks and decided that from 1 July 2023, the following changes should be made to executive remuneration. The first is to enable the STI plan to better reflect the key value drivers emerging from Brambles' transformation program. Executives will now have the 30% component of their STI previously allocated to personal scorecard objectives allocated to customer satisfaction and asset efficiency metrics. This reflects the importance of improving these measures to the future success of Brambles. The second change is all executives will now have a performance modifier applied to their STI outcome, which incorporates our performance against certain published sustainability targets, health and safety as well as individual performance against the behaviors in Brambles' leadership framework. Importantly, while this modifier can increase or decrease an STI outcome, the maximum STI outcome for each executive remains unchanged. Application of the modifier will be reviewed and approved by the Remuneration Committee. The third change is an increase to the LTI by 25 percentage points for the executive team, which will largely be offset by a base salary freeze for a period of 2 years. This change is being implemented to better align both fixed remuneration and LTI opportunities with current benchmarking for executives. Finally, the Chair and nonexecutive director base fees have not increased since 1 July 2016. Upon further review by the Remuneration Committee, from 1 July 2023, the base fees for the Chair and nonexecutive directors were increased by 3.7% and 3.8%, respectively. I believe we have the right remuneration strategy in place and that it fairly and responsibly rewards executives with regards to Brambles' performance and creates alignment with the creation of shareholder value. For those of you who would like more information on our remuneration strategy, further details can be found in the remuneration report on Pages 47 to 66 of our FY '23 Annual Report, which will be subject to shareholder approval later in the meeting. Thank you. And I would now like to hand the meeting back to John.

Great. Thanks a lot, Scott. So I will now take you through how to vote. If you're attending in-person and are entitled to vote, you will have been given a green voting card. You can vote on each resolution by placing a cross in the for, against or abstain box for the resolution. For those of us joining virtually via the Lumi platform, if you're eligible to vote at this meeting, a voting tab will shortly appear at the top of your screen. Selecting this icon will bring up a list of the resolutions and present you with voting options. To vote, simply select your voting direction from the options displayed on the screen. Your selection will change color, and a confirmation message will appear. To change your vote, simply select another option. Now if you wish to cancel your vote, please select cancel. There's no need to select or submit or send button. Your vote is automatically counted. Voting can be performed at any time during the meeting until I close the poll. You also have the ability to change your vote up until the time I declare voting closed. Ladies and gentlemen, before moving to the formal part of the meeting, I will now answer questions from shareholders. I'll start by responding to the questions raised by shareholders prior to the meeting, and this year, we received 2 questions. The first question relates to Brambles' position on the referendum for an indigenous voice to Parliament. Saturday's referendum is an opportunity for the Australian public to vote on constitutional reform. Brambles' position has been to encourage its Australian employees to inform themselves about the proposal in order to fully participate in that democratic process and contribute to this important decision. As a business, Brambles supports the consultation with Australia's First Nations people and to taking meaningful actions towards their advancement. The second question relates to the extent to which our businesses advertise in certain electronic media outlets. Brambles' businesses do not currently advertise in the electronic media in Australia, and there are no current plans to do so. So I'll now answer any further questions from shareholders. And I remind you that only shareholders or proxies or company representatives that are attending here in-person are entitled to speak at this meeting. If you are attending the meeting in-person and would like to ask a question, I remind you that you should approach the microphone, show your green voting card or orange nonvoting shareholder card and give the attendant your name. If you're unable to get to a microphone, then please raise your hand and an attendant will bring the microphone to you. And to maximize the opportunity for all shareholders, I request that you only ask one question at a time. [Operator Instructions] If you're attending by telephone, when you hear your name called out by the operator, you may ask your question. I'll answer questions in the following order: first, from those attending the meeting in-person; second, those asking questions via the telephone; and lastly, those questions submitted via the Lumi platform. So with that, do we have any general questions in the room?

Mr. Chairman, we have a question from a shareholder, [ Ms. Carrie Bible ].

You gave a very glowing report, and your dividends were excellent. So it all looked very good. But what I'm asking is that was for the financial year that finished. So have you seen in the last 3 months, the new financial year, any slowdown in the demand for your pallets, particularly considering you've got a higher cost of the pallets? And the related question to it is you issued the euro bond at 4.25%, the coupon rate. So does that mean that you are now paying higher interest on your borrowings? And what effect will that have on your results?

Really good questions. Our Annual General Meeting this year is a bit earlier than usual. Normally, we would actually issue a first quarter trading update during the Annual General Meeting, which will answer your first question. Unfortunately, as Graham mentioned in his address, because the meeting is a bit early, we haven't completed that yet. But we will be -- I think in a couple of weeks, we will be putting out that trading position. Secondly, on the borrowings, now the borrowings that are fixed are fixed for the length of the borrowings. And obviously, as a result, we're protected from interest rate rises.

[indiscernible] So I know you're protected on the 4.25%. Yes, I understand that. But is that an increase in what your borrowings were prior to your issuing of that coupon? Are you paying more interest now? Are you paying more in interest?

Yes, why don't you go -- yes, you go for it.

So thanks for the question. So yes, overall, global interest rates have gone up. And so what we guided to for the year was we said to expect overall interest expense to go up by between $15 million and $20 million year-on-year. So we do have, as John said, a fair component of our debt is fixed rate so that we're not as exposed, as many other companies are, to the rises in interest rates. But overall, yes, we do expect an increase in interest costs. Thank you.

And Nessa, the bit that I didn't know as well was did the issue of that bond increase our total debt or replacing debt that we were retiring?

So it was retiring. So it was basically prefunding an equivalent euro note that's maturing in June 2024. And obviously, that bond was issued at a time when interest rates were lower. So yes, you do have an increase. But we did an overview and included -- looked at all our debt and all of the funding costs to be able to come up with that overall guidance.

Does that answer the question?

Well, it does answer that part. And actually, the first question I asked was in the 3 months trading, have you noticed any slow down, and you answered it by saying, well, the meeting is a bit earlier than normal and so we haven't issued it. But I mean, surely, you would have some idea. Or is it secret or something?

It's not secret, but I'm just going to repeat what I said. We issue quarterly updates on trading, and I don't think it's appropriate in a publicly-listed company to start issuing one-off projections on those results to a limited number of shareholders. We have a process. Obviously, if trading was way out of line already with our guidance for the year, we would have a disclosure issued and we would have addressed that. But that's not the case, and we won't know until we close the first quarter books whether we do indeed need to change any guidance. But [ as it is ], I don't expect any particular bad news. We have no reason to believe there's any particular bad news coming.

Mr. Chairman, we have a question from a shareholder, [ Mr. William Prince. ]

So I've got a question about the auditors. It's not to the auditors, but it's about the auditors, in that PwC had a lot of scandals associated with them, whether it's appropriate to keep them on as auditors. And I note that Mr. Perkins said that for employees, that they have to adhere to a certain conduct as employees. Would that apply to PwC? And I know the audit division may be different from the tax division. And my second question on that is, has the company taken any tax advice from PwC?

Okay. Let me have a go at that. So firstly, we review the independence, the objectivity of our auditors -- external auditors every year. We did a large internal review back in 2020, and we are delighted with the performance that PwC offers us as auditors. We have no issues there. Obviously, we are aware of -- I think you said many, I'm aware of one. But anyway, I'm aware, obviously, as everybody is, that PwC has been involved in that tax issue. [ Peter ], Debbie and other of her colleagues came to us and we had a lengthy discussion. She explained that none of the partners or employees involved in that issue had anything to do with our audit. And so from our perspective, that is not actually relevant to the delivery of services by PwC to us. On your last part of your question, to my knowledge, we have not received any tax advice from PwC. We have a segregation between audit and non-audit activities. And I think we've only had a very minor amount spent on non-audit during the year, and that would not include tax. Am I right?

Yes. You're right, John.

Thank god.

We don't have tax advice from PwC, and the amount of non-audit services is actually negligible. You're right.

Good job Nessa's here.

Mr. Chairman, next question is from Mr. Michael Batchelor from the Australian Shareholders' Association.

Okay. Thanks very much. Congratulations, Brambles, on a good result. I think you've done remarkably well in a challenging environment. Well done. I've got a couple of questions. So in the interest of rotating around, I'll go through one at a time and come back. But look, I was interested in the resilience of your supply chain to climate change, and I know you do some work looking well out. I was just wondering if you could make a comment on that. Thanks, John.

I must say one of the great pleasures -- thank you, Michael. One of the great pleasures of being on the Brambles Board is getting exposure to the sophistication and depth of the sustainability programs in Brambles. I've never worked in a company that comes anywhere close to this. So we have -- well, firstly, I should say that the whole issue of sustainability and the continuity of that sustainability is inculcated into everything that management do. I know that the Board are all behind it, but we can't take any credit. It's been driven really from the grassroots up. The company absolutely embraces it. And I think that as we said in our earlier speeches, the last couple of years, we've seen huge disruption to supply chains from COVID and saw the lumber price going from whatever it was, $18 a pallet to $60; sawmills closed and all the rest of it. And it's an absolute credit to the management team that we kept going through all of that without a hitch. We had pallet shortages, certainly. But the sustainability of all our services was maintained right throughout, and I think we're in an extremely good place in that respect.

Thanks very much, John. I'm also interested, you've got a very -- whilst you seem to do a narrow series of things very well, but you're right across some very broad geographies. They're quite different cultures, standards, values perhaps. And I was wondering what you do to keep the Board familiar with those probably more outposts from Australia and also what you do to maintain the values of Brambles across those diverse geographies and cultures.

Yes. Well, sort of working backwards, on the second part of your question, management are, again, extremely focused on delivering consistency of values, of rules and principles across the whole of the business. We just had a Board meeting this morning and yesterday and exactly that topic was discussed in some detail, how do we make sure the same standards are achieved in this country and that country right across the globe and do a very good job of that. The Board is updated regularly on metrics. Whether they're safety metrics, whether they're sustainability metrics, whatever they are, the Board gets regular updates that covers all geographies. Now we don't necessarily, as a Board, drill down into every last depot in every small country. But I think we get enough of a view that we would soon see if one region was not doing as well as it should. The first part of your question, we rotate Board meetings around the world as well. So [ we consider -- we're off ] to South Africa next month. So we will get in-depth exposure to the African teams there, and we'll rotate those overseas trips during the year. So I think we're as exposed and close to the action as we can be.

[indiscernible]

So [ John Price ], also a representative of the Australian Shareholders' Association, [ our ] proxy today.

John and Scott, we certainly commend Brambles for the extension of the long-term incentives and the 25% increase that I think -- that you talked about. I wondered if you could drill down a little further for us, perhaps, Scott in the context of the personal incentives because as I see it, or as we see it, if Brambles achieves their forecast, all of the executive team will receive their short-term incentives. So the focus in terms from a shareholder perspective is how high is the drive for behavior to the longer term to look for the sustainable improvements for Brambles and shareholders driven by incentives on long term? And within that, if you could comment about personal incentives because across your individuals, there is a component in your rem program for personal incentives for executives in particular areas, and I wonder if you could enlighten the shareholders about how that works.

Look, thank you for the question. I think the first part of the answer would be the very reason why we've increased LTI is to rebalance the incentive structure towards the longer term. Now our short-term incentive, of course, is not 100% cash. It's cash and 2-year deferred equity. The best instruments that convey alignment over the long term between management, the company and you, all the shareholders, is for management to have -- to be quite aligned to long-term stock appreciation. So that concept is embedded into the structure of our remuneration by way of equity instruments, but it's also embedded into some of the performance tests for LTI. You'll be aware that LTI is half a series of external benchmarks where the company has to outperform, in a relative sense, both the ASX 100 and the MSCI Industrials Index and the 50 companies either side of Brambles and where it sits in that. So that's another layer of sort of long-term incentive with the shareholder experience. The other half of LTI being, again, 2 metrics that we think are predictive of long-term outperformance and alignment, being both revenue growth and return on capital employed. So that's -- your observation is exactly why we've made that change. In terms of personal, this year is the last year that we call it personal objectives. In that personal objective last year included -- did include safety. It included asset efficiency. It included NPS, the customer score. And it also included progress on the transformation plan. Going forward, we are concentrating those 2 into the 2 most important elements we think coming out of the transformation plan to date, being both asset efficiency and the customer experience, increasing the weighting on those from -- to 15% each. So that 30% will be bifurcated into 2 metrics. Both of those, through all of our research and all the experience in the transformation plan, are, again, drivers of long-term value and alignment with shareholder experience. The final element answering to your question is the modifier that I talked about, a series of sustainability metrics, but as importantly, on the recommendation of the CEO, a person-by-person review on adherence to the individual's contribution to leadership at Brambles. So that's yet another layer where the individual's contribution gets fed directly into rem and can flex the entire STI outcome up to max.

Thanks, Scott. The only thing I might just add to that is, obviously, the metrics you said is one thing. How tough those metrics are to achieve is another. And I think the company's performance is good in that respect. This year was a good year for management, but they still didn't get the maximum entitlements despite a really, really strong bumper year. So I think we've [ pitched it ] about right.

Mr. Chairman, a question from [ Mr. Kazim, ] a shareholder.

I enjoyed your presentation. I think you deserve credit for the hard work you've done over the last 4 years since COVID started. So thank you for doing a good job. You did mention in your opening address that there is no discount for participating in the dividend reinvestment program, and I've often wondered why because I've been participating in the dividend reinvestment program for a long time. So I wanted to know how many shareholders are participating in the dividend reinvestment program. It's probably in the annual report, but I've been too busy to find that out. How much money are you raising through the dividend reinvestment program? I ask because you're getting interest free loan when you're paying 4.5%. Why not think of the shareholders [ who are ] helping your financial position? It only seems fair, I mean, even if it was 1% or 1.5% or something because I noticed that shares we got under the dividend reinvestment program, I think, was about [ $14.49 ], I think it was. And they're trading at [ $14.35 ], so we were already underwater. So can the Board, therefore, look at the proposal to give the shareholders who are participating in the dividend reinvestment program a little thank you [ even in the way ] of a discount? Does that seem unreasonable?

Put like that, it's very persuasive.

Thank you. No, I'd like to because, I mean, it's a fair [ go ]. I mean you're raising money on the bond market and all over the place. I mean you're paying rates, which is fine. You need to get on with your business. So why not consider giving the dividend...

Well, the reason that we buy the shares on market is so as not to dilute those shareholders who do not participate, and I think it's a pretty established process. As to the actual numbers, I don't know. Do we even declare those or...

Yes. It's roughly [ 9,500 of our 69,000 ] shareholders participate in the DRP, and the value of the dividend allocated to the DRP was about $7.4 million.

Okay. And we will -- certainly, we take on Board what you said. We'll have a think about it and try and come back next year with a conclusion. Do we have any more questions? No. It looks like we don't. Do we have any on the telephone?

There are no phone questions at this time.

Great. And Robert, online?

Yes. Chairman, we have one question online from a corporate shareholder, [ K SUPER PTY LTD ], and the question is how does the Remuneration Committee justify the LTI plan vesting period of only 3 years from granting, only 12 months longer than the STI plan vesting period of 2 years? LTIs is to ensure long-term retention of key executives.

Yes. Look, it's a good question. There's no right or wrong answer to it. Corporate Australia has a wide range of periods. We think that 3 years is about right. That's still, certainly in our view, long enough for -- if there had been any adverse actions by management or whatever, [ all will have been ] clear within that period. So could it be longer? Yes. Could it be shorter? Maybe, but I doubt it. But I think we're pretty comfortable it's about right. But we review it -- every year, we look at those issues, and we review the entire rem structure against other examples and what everybody else is doing, but more importantly, whether they meet the objectives that we have to encourage and motivate our management.

Okay. Thank you. So we will now turn to the items of business. So items 2 to 9 on the agenda will be proposed as ordinary resolutions. As stated in the Notice of Meeting, I'll be casting any discretionary proxy votes that have been given to me in favor of each of the items of business. The proxy and direct vote position for each resolution will be shown on the screen. I remind you that if you are attending here today, cast your vote by marking your green voting card. And for those attending the meeting virtually via the Lumi platform, click on the voting tab at the top of your screen, simply select one of the options. No need to hit send or submit or enter as the vote is automatically recorded. We will announce the poll results to the Australian Stock Exchange later today, and we'll also post them on our website. Steve Hodkin of Boardroom has been appointed returning officer. So the first item of business is to consider and receive the financial report, directors' report and auditor's report for Brambles and for the group for the year ended 30th of June 2023. There's no vote on this item. But if you have any questions on this item and have not already done so, please submit your questions now. Are there any questions for item 1 from the floor? It would appear not. Do we have any on the telephone?

There are no phone questions.

Thank you. Robert, online?

No online.

Great. Okay. Thank you. Item 2 asks shareholders to adopt the remuneration report for Brambles and the group for the year ended 30th of June 2023. Again, if you are online and have any questions on this item, please submit your questions now if you've not already done so. Are there any questions for item 2 from the floor? It would appear not. Do we have any on the telephone?

There are no phone questions.

And Robert, online?

No questions on this item.

Great. Thank you. The resolution and the direct vote and proxy position are now shown on the screen. Please now cast your vote for item 2. [Voting]

Item 3 asks that Ms. Priya Rajagopalan be elected to the Board of Brambles. If you're online and have any questions on this item, please submit your questions now if you have not already done so. Priya's biographical details are set out in both the Notice of Meeting and the annual report. Priya has been subject to an assessment process by the Board, and her election is unanimously supported by her fellow directors. And I will now invite Priya just to speak briefly on her election.

Thank you, John, and good afternoon, ladies and gentlemen. I'm honored to stand for election to Brambles' Board of Directors today. I'm currently the Chief Product Officer of FourKites headquartered in Chicago. FourKites is the world leader in supply chain visibility. We were founded 8 years ago. We defined and created that category and now have more than 1,200 enterprise customers globally, including 9 of the top 10 CPG brands in the world. I joined the company in 2016 as the founding product leader and have led its product and user experience team since then. I was particularly excited about the opportunity to serve on the Brambles Board. From my work at FourKites, I'm very familiar with Brambles and the unique leadership position anchoring the world's largest supply chains. And given my experience, I believe that I have value to bring to Brambles' focus on digital transformation. I have a long background in digital innovation across enterprise software firms, ranging from startups to public companies. I have received recognition from The Software Report as a Top 25 Software Product Executive of North America for both to 2021 and 2022. Prior to FourKites, I was the Head of Product Management for a business unit of TiVo that operated in 70 countries with global responsibility for its products and services. Prior to TiVo, I held product leadership roles at Flexera Software, overseeing the award-winning ERP-adjacent FlexNet suite of enterprise apps. And in my prior career in consulting, I advised leadership teams at Fortune 500 firms, such as 3M, Hewlett-Packard, Emerson and ADP. I'm excited by the incredible opportunity that lies ahead of Brambles and if elected, would be delighted to bring my experience with customer-focused digital innovation to Brambles and its shareholders. Thank you.

Thanks very much, Priya. Are there any questions from the floor on item 3? Looks like we have not. Any questions on the telephone?

There are no phone questions.

And Robert, online?

No questions online.

I think you [indiscernible] them Priya. That's good. So the resolution and direct vote and the proxy position are now shown on the screen. Please, therefore, now cast your vote for Item 3. [Voting]

Item 4, I ask that Mr. Ken McCall be re-elected to the Board of Brambles. If you're online and have any questions on this item, please submit your questions now, if you've not already done so. Ken's biographical details are set out in both the Notice of Meeting and the annual report. Ken has also been subject to an assessment process by the Board, and his re-election is unanimously supported by his fellow directors. I'd also now like to invite Ken to speak briefly on his re-election.