Bremworth Limited (BRW.NZ) Earnings Call Transcript & Summary

So thank you all for being here. Good afternoon. Apologies if this slight resonance. Apparently, if I touch this at all, everyone can hear it, so I'm going to do the best not to. So I'm George Adams, Chair of the Board. Today's meeting is being held both in person and online through Computershare's virtual online meeting platform. So welcome to all present in person or joining us virtually. Before I go any further, there are a few administrative matters, which I will deal with. So for those shareholders of the venue, if there is an emergency, please head to the nearest exit and follow the instructions of venue staff who will guide you to the designated assembly point. The toilets are outside, just that way, and one of the Bremworth or venue staff will be able to direct you. So we're pleased, today, to be able to share some of our passion for our company at today's meeting and to update shareholders on progress since we last reported. So following presentations by myself and our CEO, Greg Smith, will be an opportunity for shareholder questions and discussion. We'll then move to the resolutions, which were notified on a notice of meeting. This was circulated to shareholders on 24th of October 2024, and I intend to take it as read. The audited financial statements for the year ended 30th of June 2024 were released to the NZX on 25th of August 2024, with the annual report following on the 30th of September 2024. So I declare that a quorum is present and that the meeting has been duly convened. So how to ask questions? If you have a question during question time later on in the meeting, please raise your hand. And I will ask for one of the roving microphones to be brought to you. We would appreciate if you could identify yourself before putting the questions to the directors. I realize not everyone needs a microphone, but the reason we get them to you is that people at home can't hear you. So it's actually quite helpful that you wait for the microphone. So voting today will be conducted by way of poll, and that means that 1 share represents 1 vote. If you are eligible to vote at this meeting, you will be able to cast your vote, using the voting paper accompanying the notice of meeting, or that was handed to you when you checked in. Simply select your volume direction from the options shown on the voting paper when voting opens later in the meeting. For those shareholders attending the meeting virtually, if you would like to submit a question, please select the Q&A tab on the top of your screen. The Q&A function is available throughout the meeting. So please feel free to submit questions any time. Your questions will be addressed at the relevant time. Questions may be moderated, or if we receive multiple questions on 1 topic, amalgamated together. [Operator Instructions] Shareholders attending online to cast your vote by clicking on the Vote tab. Once voting has been opened, the voting function will allow votes on each of the resolutions to be submitted. Select your voting direction from the options shown on the screen. You can vote on all resolutions at once or by each resolution. You can change your vote up until the time I declare voting closed later in the meeting. So I now declare voting open on all resolutions, and I will give you a brief warning before I move to close the voting. [Voting]

Joining me today are your directors. I'll ask them each to raise their hand. I want to introduce them, firstly, Dianne Williams, John Rae, Paul Izzard and Katherine Turner. And there is, of course, Grant Biel, Co-Founder of the Bremworth Carpet Business and Director Emeritus sitting at the end. Your directors bring a diversity of skills and experience and thinking across the table and ensure core competencies are met across critical areas for our company. Also joining us today are our CEO, Greg Smith; our new CFO, Mandy Tomkins-Dancey here in -- with us; and all the members of Greg's executive leadership team. A number of our advisers, including our auditors are also present, and I'd like to thank all of our professional firms who provide valuable advice to Bremworth during the year. Thank you. So I'd now like to move on to my presentation for today. As you know, FY '24 was a very challenging year for Bremworth. The team worked tirelessly to rebuild our supply chain and ensure the future viability of our business post Cyclone Gabrielle. Despite that, we acknowledge, at least from the outside, it'll feel like a standstill year for shareholders. Your patience and continued to support our deeply appreciated by management and Board. We did make, however, substantial progress last year, establishing a strong foundation for future growth. And our focus has been on several key priorities. Firstly, settling our insurance claim. 21 months on, it is obvious that this is a complex and resource-intensive process. The claim is 2 parts: material damage, which covers plant, buildings and stock; and business interruption, which takes into account costs and lost margins due to the cyclone's impact on trading. These are both very large claims. It makes sense that management is thorough in the work required to ensure Bremworth is left and the best possible position at the completion of the claim. This means we receive a settlement that fairly reflects the full value of the reinstatement of the Napier plant. It also means recognition of the large impact on the Bremworth business as a result of the extraordinary costs that have been incurred to ensure business continuity and fair reimbursement for lost margin. Napier, the ability -- the inability to access Napier's yarn capacity since the floods has severely impacted our ability to meet demand and supply the market, let alone grow. Management and the Board look forward to the settlement of the insurance claim in the coming months, giving Bremworth control over the reinstatement of the Napier plant, and to allow it to rebuild the business to pre-cyclone capability. In the meantime, we have taken a staged approach to the reinstatement of our Napier plant. To date, this has been focused on the key stages of dyeing, spinning and finishing of yarns that are specific to Bremworth's exacting quality standards, and this will continue throughout 2025. Expanding our hybrid supply chain capability, I will recap some of the key messages in the annual report with a focus on our existing and new capacity. The new supply chain is crucial to building resilience should another similar catastrophic weather event arise again, while also delivering scale to the business and ultimately creating opportunities to grow Bremworth far beyond the size of the business today. Sourcing yarns that meet our quality expectations has been difficult. I'm happy to say that we now have 5 external yarn supply partners, 1 in New Zealand, the rest overseas, that meet our requirements. However, our Napier Whanganui plants will, together, continue to form the cornerstone of our new supply chain, supported by our external yarn supply partners to give us the ability to grow capacity. Whanganui will continue to spin our very popular felted yarns, which are unique to Bremworth, combining beautiful textures and color with superior performance. With consistent yarn supply now available, the Papatoetoe tufting operation is improving performance and still has capacity to support growth. This improved supply chain is already benefiting our customers who are now receiving products we were previously unable to deliver. In terms of positioning the company and the team for growth, management has worked to reduce costs, improve margins and enhance systems for efficiency. This work essentially realigns our cost structure with the size of the business while also positioning us for growth. Management will continue to look into further gains in margins as the business begins to scale up this year. This will include the size of the range, yarn efficiency, supply chain optimization and designing margin into the products at the development stage. We expect a material improvement in margin over the next 3 years that will drive increased cash flow and profit. We have invested in our people and in our systems over the past 12 months to ensure that we are ready to capitalize on the growth opportunities ahead. This includes a new capability that recognizes the skill and focuses required of the brand to be sustainably profitable. In terms of our markets, the New Zealand business was able to maintain some momentum during the supply disruptions of last year. However, Australia was hit hardest. Greg will share with you management's plan to recover our position and to grow again in that geography. Suffice to say, growth in Australia is a key focus for the team. The Board expects double-digit growth versus last year in New Zealand and Australia in FY '25. The Board is also excited by early progress being made in other geographies, with the United States being of particular interest due to the sheer size of the market and the interest we have received from distributors and retailers in our premium products. In terms of Bremworth's reputation, we are committed to building a company that is important to our customers, desired by end consumers and admired by the market, yet one that delivers shareholder returns consistently. In conclusion, while we have made good progress this year, I want to acknowledge that management's admirable aspirations for growth have been put under severe pressure by the current economic climate, and then also confidence our customers express in our ability to supply post-Cyclone Gabrielle. As you will no doubt have heard from across a wide range of companies during reporting season, the market for consumer durables is particularly depressed. And while we are seeing a recovery in volumes, the uplift is slower than anticipated. And Greg will provide more detail in his presentation. In summary, we have led the grind work for a successful future. We are well positioned for growth in FY '25 and beyond an anticipate a return to dividends from operations by FY '26. We I want to thank you for your continued support. We are excited about Bremworth's future and look forward to delivering value for our shareholders, staff, channel partners and consumers as the year progresses. Thank you. I'll now hand over to Greg.

Thanks, George. I think you did pretty well considering he's a bit under the weather at the moment, so well done. Good afternoon, everybody, and thank you for joining us for Bremworth's Annual Shareholders Meeting. I'm Greg Smith. And over the next 10 minutes, I will share our full year '24 results, the strategic direction for the current full year '25 fiscal year and some insights into our year-to-date performance. Results in full year '24 were impacted by supply constraints following Cyclone Gabrielle that forced our Napier plant off-line. As a result, our operating revenue fell 10% or $9.4 million to $80.3 million, and gross margins dropped 3.3 percentage points. Net profit after tax was $4.6 million, and this was boosted by Cyclone Gabrielle-related insurance income that totaled $26.5 million. This takes the total insurance proceeds since Cyclone Gabrielle to $62 million. carpet and rugs revenue dropped by 20% to $57.1 million. Elco Direct, our wool buying business, grew by 28% or $5 million in revenue. And this was due to growing share and increased demand while keeping costs low. The Elco Direct business offers 10-year contracts to growers who supply wool to our exacting standards. These contracts support growers and have attracted new farms. We're proud of our farmers who work so hard to provide the best strong wool in the world. And I'd like to congratulate the entire Elco team for a great year. While we've been up against some headwinds, as George mentioned, in full year '24, we have laid solid foundational blocks for sustainable profitability for our carpet business. We have started on the stage reinstatement of our Napier plant to deliver on the quality and product differentiation that we are known for. We've embedded our new hybrid supply chain to enable growth, reset our baseline cost structure. Importantly, we strategically invested in our brand, our customer experience, research and development, technology and our inventory, which is well positioned to provide for growth opportunities over the balance of full year '25. We've also implemented new product distribution tactics and realigned and restructured our people line up, including my senior leadership team to ensure that we have the right capacity, expertise and agility in place to optimize the opportunities before us. Looking at full year '25. With these foundational blocks now embedded, we have one central theme: To accelerate growth. Our new hybrid supply chain anchored by Napier and Whanganui plants are supported by external yarn supply partners and can reliably deliver quality products to our customers fast, which, in turn, bolsters confidence in Bremworth with our channel partners and their sales teams. There is still work to be done to fine-tune our supply chain and optimize our inventory position to strike the balance between stock on hand versus sales demand, while improving margins through scale and strong relationships with suppliers. We are focused on growing market share across both New Zealand and Australia. As George mentioned, New Zealand has been stronger despite the last 12 months of disruption, reflecting the brand's strength in our home market. I would like to thank our retailers who have supported us during that period. The Australian market was hit hardest by the stock shortages. And as a market, we are acutely aware it should be much bigger and represent a far greater share of our total volumes and revenue. Now that our supply chain is back up and running to enable growth, we're excited about the potential of the Australian business. This financial year, we've expanded the number of stores in Australia, offering our entry-level products by 225. This makes our products more accessible to a wider audience, and we are confident this will help us grow share. Moving on to full year '25 focus areas, and starting with our brand. Bremworth is New Zealand's most trusted carpet brand. We will continue to raise awareness of the benefits of wool consumers. This includes elevating Bremworth wool flooring as a genuine architectural surface that enhances the indoor environment with natural benefits that synthetics cannot match. This, in turn, increases Bremworth's value perception with consumers. Now over the last 12 months, we've spoken a lot about supply chain and the focus we've put there, the stage reinstatement of our Napier plant and restoring the business to pre-cyclone capability. It cannot be overstated how important this is and how much value it will add to Bremworth over the long term. The diversification we now have is a strength. This year, the benefit will be tangibly realized through building confidence in new and existing channel partners, delivering high-quality, beautiful products that perform reliably every time. Shareholders should expect supply chain efficiencies, along with a number of other initiatives to improve margins over the next 3 years. New products. Due to Cyclone Gabrielle, we were forced to delete many of our products, leaving gaps in our consumer offering. This year, we've launched 4 new ranges in the first quarter. This grows our range by 20%. They've been well received by retailers, designers and consumers, and these ranges demonstrate our focus and commitment to innovation, using unique yarns to make soft flooring more exciting and attracting more people to the brand. I mentioned distribution earlier. We are expanding our presence through wider distribution with key retailers in both markets. This means we are getting our products in front of more consumers, which will drive growth in both countries. Lastly, now that capacity constraints are overcome on most ranges, we are currently reentering the commercial channel and are building new product offers to support that. This channel has previously driven large volumes at lower margins. Our new hybrid supply chain gives us the opportunity to win these projects with improved margins as we scale our own and our yarn partners' capacity and efficiency. Beyond what I've already mentioned, we also remain committed to our direct-to-consumer rug business. This business has capitalized on the growing trend of wooden flooring, catering to consumers seeking to blend hard and soft textures in their homes. This segment experienced good growth last year, and we continue to experience a strong increase in orders year-to-date. This rug business has a wide potential audience due to emerging trends in flooring, pricing, consumption and home ownership. It also makes for a more frequent purchase. We remain confident the rug business will become a more meaningful contributor in the coming years. On to experience stores. Our flagship brand, experience store here in Parnell, Auckland has provided invaluable insights into consumer preferences for soft flooring. The store effectively positions Bremworth wool carpet as a premium flooring option, elevating its design credentials and appeal in the market. In addition to showcasing rugs, it serves as a platform for our channel partners, providing valuable leads and also architects and designers who showcase all flooring to their clients. It's also worthwhile acknowledging the store was awarded Gold for Retail Design at the New Zealand Retail Interiors Association Awards last month, and a Gold pin at the Designer Institute New Zealand Best Design Awards. Technology. We recently announced that Caio Diehl is joining us in early December. This newly created Chief of Technology role demonstrates that we are committed to investing in tools to support efficiency and insights in all parts of Bremworth. Technology will be utilized to support cost reduction, reduce complexity, improve productivity and ultimately, identify opportunities quicker. And Elco Direct. Our Elco business remains a key strategic pillar. It provides another revenue stream to our carpet and rug business while giving Bremworth supply security and continuity, margin stability and quality assurance. Land use is changing, and some crop growers are getting out of sheep breeds that require shearing due to economic factors. Elco's low-cost direct-to-farm business model enables us to offer superior returns to growers, which helps give them confidence to stay in the game. We expect market share to continue to grow in the year ahead. Full year '25 trading update. After 4 months, we can report in the carpet business an unaudited 2% improvement in revenue versus full year '24. The improvement is important as it demonstrates that with supply aligned to demand, we can grow. With monetary policy easing in New Zealand, we anticipate more demand and growth to continue in the second half of the financial year. As anticipated, we have delivered double-digit sales growth -- sorry, sales volumes in Australia. Margins across newly created ranges are also pleasing as margin is a key design input as we launch these new products. We will provide a further detailed trading update at the half year. The balance of full year '25 is an exciting time for Bremworth. Our focus on key markets, product development, customer centricity and fine-tuning our supply chain will drive our success. In addition to this, as George mentioned, we're also in the process of securing our entry into a new geography, which we are approaching with cautious optimism. Management is confident in the future revenue and profitable growth of Bremworth and in our ability to deliver value to our shareholders. Thank you.

Thank you, Greg. I'd now like to invite questions in relation to the FY '24 annual report, or to today's presentations by your Chair and CEO. There will be a question -- another opportunity to ask questions on the resolutions once they have been put to shareholders afterwards. In the meantime, earlier, as I've said, if you want to ask a question, please raise your hand, introduce yourself and a microphone will be brought to you. So thank you.

Hello. My name is [indiscernible]. I'm a shareholder. So I have 2 questions. First of all, why there's such a delay to pay dividend? The second question is for such small confined room, why not limit to only shareholders to attend.

Okay. So the first one, generally, we have to basically be profitable to pay a dividend, and I assume that's what you're referring to. So I don't think we've had sufficient profitability in the last -- since 2014 to actually pay a dividend. And as soon as we're in a position to do that, we have a dividend policy which says that we will pay dividends, so I think it's relatively straightforward. Had we not had this cyclone last year, I believe we would have been in a position earlier to have started to pay dividends, but the last 12 months have literally been about rebuilding the business. And had we not done that, frankly, we would have had to close. So I think we needed to be really clear about that. Ultimately, we will pay a dividend in the future and our anticipation is to do that in FY '26. Regarding your comment around the size of the room, the second year, we've used it. Last year, we had plenty of spaces. And quite honestly, I think we do our best to make sure that the - these meetings are as accessible as possible to shareholders, but also to anyone else who wishes to be here who is appropriate to be here, so -- but that's -- your comment's noted. Thank you. Steve?

[ Steve Duncan ] is my name...

We just need you...

[ Steve Duncan ] is my name. I'm a shareholder. Mr. Chairman, I would like to ask 2 questions, and I would like to make 3 recommendations to the directors. And my first question, I would like to make these first 2 questions to the longest-serving directors. And my first question is for Ms. Williams. And I would like to ask her, how many years it's been since the company paid shareholders a dividend?

So just to be really clear, okay, and I want to be really clear, as Chairman, I'll direct whoever I believe, should be the best person to answer that question. But in this case, I'm quite sure Dianne has got the answer for you.

But certainly, before I joined the Board -- so I joined the Board in 2015, and there hasn't been a dividend at that time.

My second question is to Mr. Rae. And I would like to know what level of profitability does the company need to achieve before a dividend is paid?

Steve, I think that's the 2 different questions now because of the change in our supply chain. But the question is not the quantity of profitability, but the sustainability of profitability. So we have to get over the hump, which gives us a sustainable profit level. And even smaller amounts of profitability at a sustainable level should we sustain a dividend policy. We don't think that it's useful to have vast wild volatility in our profitability, paying a dividend one year, not the next. So we're looking for a gradual and steady improvement in sustainable profitability. And as the Chairman pointed out, we think, on the forecast, that 2026 is the virtual year that we believe we'll be able to pay a dividend at this -- on current forecast.

So I'd just like to refer to a couple of notes, Mr. Chairman, and then I'll come to my recommendations. So I had a look, and the last time a dividend was paid was in 2014.

Correct.

11 years ago. 11 years ago, the turnover of the company was $201 million. Today, it's $80 million. In 2014, or since 2014, the cumulative losses have amounted to $40 million in this company. In 2014, shareholders' funds were $93 million. Today, they are $54 million, quite a change. And you would have to think that, wholly Bremworth or Bremworth has been one of the worst-performing companies in terms of adding shareholder value. Let me refer to a couple of other notes, if I may, before I come to the recommendations. If I listen to Greg, and he talks about the new Bremworth strategy, where you are selling only woolen carpets and rugs, and I agree with that strategy. That makes a lot of sense to me. However, the markets that you compete in are dominated by synthetic carpets. You know this as well as I do. And these are the products that customers actually want to buy, and most of these products are imported. And as a result of this, Bremworth is now really a niche supplier. Like, here are your points, but if you look at the share that you have in the market, it is very small. So I would like to just make these 3 recommendations, if you bear with me. And I'm stuck on a page. The first recommendation I would make is that the company should add some ranges of imported synthetic carpets. And I know this will be a horror to you. These can be branded separately from Bremworth, and it's something the company has done for years. And Grant will remember that as well as I do. So why would you do that? If you were putting that question to me, well, you would be selling products that most people want to buy. You would generate some much-needed additional revenue and profit. You'd be able to compete in the market and become more relevant to the retailers, your customers. Because right now, you are not. And you would have some product differentiation. Because right now, wool only, you have all your eggs in 1 basket. So that is my first recommendation.

I'm going to have to just hurry you along here, if it's okay.

My second recommendation is that you need to take some actions to address the high levels of customer dissatisfaction that you have. This isn't the forum to get into that detail, but this will significantly impede the progress that you are trying to achieve. And the third recommendation I would make, and excuse me, Grant, when I say this, I think we need some new directors. I think we need some fresh thinking on the Board. And I think we need a director or 2 who knows the carpet business. And if we do that, we get some regular dividends and a valuable share price. Thank you for listening to me.

Thanks very much for that, Steve. Anyone else? Sir.

[ Roy Daz ] Much was made in this insurance problem, and you're hoping to conclude in this coming year. But is what you're trying to conclude substantial? Or is this just a cleanup of insurance?

Thank you for that question, [ Roy ]. We have, as I said, 2 types of insurance. We have business interruption and we have our, effectively, plant and equipment insurance. The plant and equipment insurance is insured for in excess of $100 million. So it's a very substantial number that we're talking about. We've already received $62-ish million over the past 12 months. Largely, that will go against our business interruption payments. But the numbers we're talking about are genuinely very important and substantial to shareholders, which, I think, is why we're taking the time to make sure we do this properly. Worth pointing out that our indemnity period for the business interruption insurance didn't actually conclude until the 14th of August, just passed, which means that we would've been really very unlikely to have settled that up before the indemnity period finished. So we're working very hard on, actually, both of those individually to make sure we get the right outcome for shareholders.

Quite a substantial [indiscernible].

Potentially very substantially, yes. Absolutely. Thank you. Sorry, Front row. Can we grab a mic for just in the front row? [ Rochelle ], thank you.

[ Coralie van Camp ], shareholder, and I've been coming here since time began. Well, it feels like that anyway. You did go into synthetic carpets, and that was a disaster. So you made the decision to get out and concentrate on wool. It's good for climate change. It's good for nature. It's good for everything. But probably, your advertising campaigns have not been the most enthralling that I've ever seen. Now I just want to ask you, you say that you've got -- you had a terrible bad luck with Cyclone Gabrielle. What a setback. Even with the insurance, it set you back production-wise. And that really -- it doesn't compensate by money. So you lost your supply chain of yarn. And now you've got -- you're importing yarn from 2 different suppliers to make up the shortfall, why? Are they all New Zealand wool yarns?

So the answer is yes. So in fact, we export our wool directly to them to make sure it comes back to us as New Zealand wool. Carry on.

Thank you. That sort I wanted to know. I just wish you the best of luck. It would be wonderful to see a great turnaround in this company.

It would. Thank you for that, Coralie. Sorry. Yes.

I'm [ Alan Best ], and I'm proxy for members of the New Zealand Shareholders 56Association. You've probably seen our analysis, so I won't run over that, it's pretty depressing. But I just have a question over the importation of yarn. Stock turn's been going down. And when you lengthen the supply chain, generally, it has a negative effect on stock turn. Are you pretty confident that you can actually manage that to improve stock turn now?

Well, the answer is yes, we are. There's no doubt on the part that we will end up with a longer, longer supply chain and in all likelihood, lower stock turn than we've had previously. But in all likelihood, you won't have the capital investment against that required. So you're either going to have stock for more time or capital to produce it. And we think, ultimately, we'll have a better -- we'll have a better blend by having a slightly longer supply chain in terms of overall stock turn.

[ David Greve ]. The first question is working from home. Do you have a policy about staff working from home?

I would love to work from home today, but it's just not possible, unfortunately.

I'm talking about the office staff.

I know. I know. Greg, do you want to cover that off?

Yes. I can cover that off for you, David. We have a flexible working from home arrangement. That said, I would suggest that around 75% of our team are there every single day. And so we do work very closely to get it. There's -- in fact, it's probably higher who comes into the office and collaborates and works together. So we've seen that just steadily grow over the last 12 months.

Your second question, the competition in New Zealand companies selling woolen carpets, not synthetic carpets, woolen carpets. Are we about 35% of the market?

In terms of wool?

Yes.

Yes.

And what's our main competitors? What -- how -- are they outpricing us? Or -- because we've got a superior product.

Yes. It's interesting. Look, I mean, let me answer this first. So I mean, look, it's hard to get data, but we're probably not too far away from the numbers you've sort of talked about. Our main competitor here is Godfrey Hirst. We tend to sell -- our top end products are sort of Bremworth range and our Aspire range tend to sell for more than the Godfrey Hirst ranges do. So we will be anything up to $100. Our [ meats ] are more expensive. And actually, those are the products that are actually in growth fully enough. Where we have more competition is in our lifestyle range, for sure, because that's more economically priced. And so that's much more of a -- I refer to that, that's more of a knife fight than it tends to be at the top end. So certainly, at that lower price point, we tend to have much more competition, not just from GH, but also from a number of others.

How close is Godfrey Hirst to us in market share? Are they 20% or...

Are they pretty close?

How -- they're slightly more than that is our understanding.

Yes.

Slightly than us are they?

Yes.

The third question, we've always had a very large group of retailers who have been loyal to Bremworth carpets. Have we maintained most of those retailers during this very difficult period with Gabrielle?

Look, I think I can give the answer to that, which is we've got a great group of retailers who've been very loyal to us. And we have actually maintained those because we've done our best to actually not short them during that time. And we acknowledge that, actually, when we didn't have stock, a lot of them still actually stayed very, very supportive of us. Greg, you might want to comment on that?

Yes. I think as I mentioned in my presentation, the New Zealand retailers stuck by us and we saw a very small reduction across full year '24. Australia was slightly different. It's because we have a slightly different model over there from stance perspective and so on. So it's easier. If you don't have the product, you can just take the sample off a floor. So we saw quite a pronounced drop in Australia as our results suggest. However, Australia is bouncing back far quicker as well. So we're experiencing loyalty coming back. And to Steve's point around relevance, you can't sell if you haven't got product, and we now have a very strong inventory position, which gives us a lot of confidence.

Thank you.

[ Susie Thompson ], shareholder. Firstly, congratulations to the Bremworth Board, to Greg and the executive team, and to all the staff who's surviving what's been a really -- another really tough year. It was great to read an annual report that feels so geared for growth while remaining true to Bremworth's core values. My siblings have just said that what I was going to say was far too long, so I'm trying to make it briefer. Today, I'd like to question -- to ask a question around Bremworth's strategic direction in marketing. So we all know that we've had the last few years promoting the change turn or wool -- bespoke crafted woolen product. And in fact, crafted feels different is the byline and the latest campaign. And this position has been reiterated a lot in the annual report, partnering with nature. And our purpose is to find a more sustainable way. So we -- my family and many other people who are passionate about wool, people who've spoken to me recently have all been really confused to see the latest marketing campaign by Bremworth using AI, artificial intelligence. It seems fundamentally at odds with Bremworth's core brand message, and we feel concerned about this direction. We assume that Bremworth knows about the huge public backlash to Coca-Cola, Toys "R" Us and Jaguar's recently, AI -- the recent generated AI ads. And now the same outcry has happened with Bremworth, too. This morning, I've just seen the comment section of the campaign brief website, where, at the end of the article and video, on Bremworth's ad, virtually every single person, and there's quite a few of them, have left scathing remarks. The main gist of them is that Bremworth has blown any brand identity integrity it had built up since the change to all wool. One, it is a story of natural beauty ruined by synthetic shortfall, the perfect example of when not to use AI. And I love how they're dressing a business decision up as a creative one. So it seems there's a disjunct between Bremworth's strategic intention and the most recent marketing campaign. As shareholders, we want to feel confident that the brand's core mission, ideals and values are represented in the marketing campaigns. We also want to feel confident that a good strategy, translated into a smart marketing campaign, will also result in good sales and a shareholder dividend. Sorry, finally, my question is what steps are Bremworth are taking to ensure that future marketing campaigns are on brand and true to core mission and strategy? And also -- but maybe this can't be answered here, how does this translate into sales targets?

Yes. Thank you. Look, we'll ask Greg to address that. Funny, I only saw the Jaguar one quite recently. And I actually don't think that's AI. I wasn't sure I was just thinking it's basically a dumb marketing, frankly. So I'm pretty sure that failure in this sort of an area, and it's a small failure. It's not fatal and it's not permanent. We did 1 ad, which was AI. I don't believe we have any more plans for any further. But the guys took a little bit of risk, and I genuinely don't believe that's fatal per se. And I don't believe it invalidates our overall brand strategy. But I'll have a quick pass over to Greg on that.

Yes. Thanks, [ Susie ], and thanks for your support and the family. It's always greatly appreciated. The feedback in relation to the ad is taken on Board. We have read all those comments. I assure you we're very -- we try and keep very close -- pretty close to what was going on. And we did know that it was going to be a risk. Maybe it's worthwhile just providing some brief context. The production of the ad and the media spend was really the 2 driving factors. Ultimately, we wanted to have brand alignment. So I think that's a problem if we see a disconnect between what the brand's saying and how we show up. we don't want that. But what I can tell you is that, with the reduced production spend, we were able to increase the frequency of our media spend. And that meant that more consumers saw the ad. And that ultimately was our overriding driving force between using AI from a production perspective and basically balancing the economics of landing the widest reach possible. Now I suppose there's always going to be a discussion around whether or not we should use AI as a natural company, and we thought about it a lot. And one of the team said, "Well, we photoshop every single shot. So wasn't that changing it as it is? And isn't this an extension to that?" Now we can again get into any sort of disagreement about that. But ultimately, the brand alignment piece is what I'm taking away from your comments today, [ Susie ], and we'll certainly relook at that to make sure that what we're doing in the future is more closely aligned to brand. But ultimately, we prioritized an economic decision, which was reach more people with the message around carpet and make it aspirational. And I think that -- we would argue that visits to websites are around 40% up, that it's been successful from that point. But there's other metrics that we could look at, so thank you.

Thank you. I need to come to Brian first. Sorry, Rochelle, if you wouldn't mind. He's been waiting patiently here.

Thank you. I'm [ Brian Wolfe ], #2 shareholder in the firm. Congratulations to [indiscernible]. He's been on the harvest. It's been impossible for Bremworth Cavalier, et cetera, to keep going with his support. I don't know why. [indiscernible] is an intelligent guy. When you look at the Herald today, and our shares are worth $0.40. $0.40, 4-0, we've got to be mad. But if it wasn't for Greg who's up over there, we would have been on by Godfrey Hirst. But fortunately, we don't have to put up with that c***. But Bremworth is the only share I have, partly [ become ] my share. And recently, of course, just a very small firm, I'm sure that was making more money than Bremworth. But never mind. But $0.40 a share is ridiculous. And I thought, hell, I intend to buy a few more of it, but if the price goes up too much, well, I won't. But $0.40 a share, that says a lot. But I've got a lot of faith in the wool market, but we are really struggling to make profits. And we've been probably, almost maybe 1 year out, we've got some profits, hallelujah. It's ridiculous, really, that -- I can't remember being down in the [ Panmure ]. I've seen when Tony Thompson was, like, [ mini parties ] meeting. We were getting 3 dividends here. And here we are now. It's about 15 years since we've had dividend. And I'm nearly 88. So I hope the Chinese thing for the 8s comes up pretty good. Thanks. But I really would appreciate, a definite think I'd add, when we're going to have a dividend. And I presume that the tax-free dividend will be the first to be paid, no tax on it. I'm all in favor of that. Okay. Thanks very much.

Thanks, Brian. Yes. As I say, at this stage, 2026 is when you'll get your first dividend. Yes, since 2014. Yes.

[indiscernible]

Off the top of my head, I'm not sure, but it's certainly more than enough to pay a dividend. Thank you. Yes. I'll come back in a second.

I'm a shareholder since 2017 when the company is still owned a [ scouring ] factory.

[ Scouring ].

Yes. And I'm accountant. So when I researched, I knew people in this company. "Oh, what a great company. It has great cash, great inventory, not much debt and a lot of properties." And did some calculations, okay, this is -- the equity is great. So I purchased some shares. But what surprised me is that it sounds like it's like a Benjamin Graham investment. So it's like a cigarette butt. So it's -- the price is low, but you can have higher cash or property on top of the equity. But what impressed me, surprised me is over the last about 7 or 8 years, the equities keep shrinking. So -- and also, you -- we have around $60 million of insurance processed. And for the shareholder, which all the annual papers detail why. So it seems the money is gone, like -- you spend money like a rich kid. So for me, my question is what's going wrong? And why you do not pay the dividend? And if you can't spend the money more wisely that even the term deposits -- so based on the calculation, the Cavalier, the Bremworth's -- the Bremworth annual paper is really, really easy to read. You have the cash, we have the inventory, you have the revenue, you have -- and you have the equity. But the thing is that you are losing money every year. I mean, I'm not sure if you are not taking consideration of the accounting policy of the insurance proceeding as the revenue. The cash is -- I mean the cash is blood, you are bleeding out. So that's really concerning me as a shareholder. I was very modest people. I didn't ask a question a lot like this kind of tricky questions in the last 7 years. But this time, I have to raise my concern. I run a company. I'm also accountant, financial controller of the company. If you give me $1 million of cash, I can spend it for 10 years -- for forever. But like $1 million here is, like, gone, so easy. So this is my question...

Is there a question? Is there a question?

My question is that, what's -- I want, maybe, your brand -- you help to close the knowledge gap between my experience and how we are spending money and utilizing our assets. How do you increase return on assets? So why the efficiency is so low? And also a question to Greg. Greg, you're a great CEO. I had a lot of calls with Greg. I'm sorry for that. I bother you a lot. So you're a CEO of an iconic company, Icebreaker. But I don't think Icebreaker's performance is as bad as Bremworth. So what's the difference? What's wrong? And why the execution is kind of so slow and becoming very worrying to me? So I do sense very quickly, but from every annual meeting, I can notice that you seem that -- I don't know whether you have the same feeling or not. It seems that you always have something to blame. Blaming something from the U.S., something from China or something -- real estate or interest rate, for sure, and the hurricanes is bad and sorry for that, but I want to hear something about your internal reflection about the team, how we can put our team together. We as shareholder -- I will be together with you, Greg, but I want to hear something new. Like, when Elon Musk purchased X, Twitter, right? 80% of people gone, like, in 3 months. I'm not sure -- I'm not talking about their practice, but I'm talking about execution. Why he can be that fast and we can't make a difference after 7 years? So that's my question.

So I have to remind you, when Elon bought X, he destroyed about $40 billion of value in about 10 minutes. So it wasn't that he essentially bought the company and made it wonderful. It's a lot smaller than it was previously. You said you bought in 2017, and we had no debt.

You had some debt.

We're in, like, $60 million -- I think 60%...

You paid for that by selling the [ scouring ] company?

No, that was a very small portion, but we had $60 million to $70 million worth of debt. And people will reflect on this when they say that Steve was reminding us that the last time we paid a dividend, it was -- the company had borrowed money to pay dividends, frankly. And so it took us until 2020 to clear our balance sheet of debt and get to the point that we were actually able to think about and our strategy to grow this business going forward. And clearly, we've not got there. But I have to say, when you lose your production assets, which we did last year, that's a bit of a stumbling block on the roadway to actually making progress. And it's not an excuse. It's a reason and it's quite different. So I genuinely appreciate -- maybe the question you have is, Greg, in terms of our business going forward, are you comfortable that you've made enough changes, that we have enough green shoots to believe in that the business is going to deliver for us in the future. Is that more or less the question? I got to summarize it.

Yes, more of. If you invest in some, like, a supply chain, whatever, or the new technology officer or the new product range, we -- and the shareholders, I think it's a very natural question is that, how I can make sure you are spending this money very wisely. How the return can -- assuring our shareholders the future is permitting. Otherwise, next year, another excuse. I'm not sure whether next year is more tough or not. I'm not very optimistic about the overall environment. So a lot of challenging, go ahead. So -- but Bremworth is able to meet the challenges going forward. Or I mean, internally, we can have some growth no matter what happens. So that seems to be a very dumb question, but it's actually confused me a lot, a bit.

Okay. Well, thank you, Sean. So we've -- the majority of us, right, the majority, we've invested an enormous amount for this financial year. in building inventory. So last financial year, as George mentioned, we simply didn't have enough inventory to supply the market. That has affected both financial years, to your point, around each year, there's another excuse. I think it's important to note that, that particular event affected full year '23 and full year '24. And we have insurance, which is able to support those losses which is what George has spoken to. And so when you talk about cash, we've explained that there are proceeds that are underway from a settlement perspective to acknowledge that loss and -- as opposed to an excuse that, that's what's going to happen. That's the reason. As far as execution goes, we're focused on growing. We've changed our teams in both -- in Australia and my leadership team has changed quite significantly. So there's been a number of personnel changes to help support the new business. So a new Chief Operations Officer, because we acknowledge that the supply chain is now more complex than before. And so we needed to bring in expertise and I brought in a previous COO of Icebreaker that worked with me who dealt with complex supply chains. And I'm confident from that perspective. And so for me, the frustration has been -- and for the Board, I can assure you, is immense in the lack of performance. That performance was disabled by the stock. We see good growth in Australia at the moment, as I mentioned, double-digit growth in volumes in Australia. So you should start to see, particularly in the second half of the year, some of that coming to more fruition when it comes to revenue and cash. So we feel very confident about that and also the tactics that we're employing to grow the business significantly, whether it be through a new channel like commercial, which is quite vast volumes and used to represent around 25% of the business, which is currently largely 0. There's growth there along with new geographies as well, which we expect to grow fast over the next 3 years. So we're very confident in the future. We appreciate your support, and I appreciate your phone calls and we do treat every dollar like it's ours. We wish to run the business effectively. We understand the pain that shareholders have been in for a long, long time. And as John suggested, we will get back to paying that dividend and George, hopefully, for full year '26, that's the forecast. And we want to make sure that it's sustainably profitable for the long term. Thank you.

Greg, are you more excited to run Bremworth? Or Icebreaker?

I mean that's like a recruitment question right now, so.

Thank you, Greg. A great CEO. I really like Greg's style in terms of leadership execution and it's -- yes, thank you.

Thank you. Can I just also clarify, business interruption insurance, while it clearly brings a lot of cash into the business, it's actually not designed to make money off. It's designed to replace increased costs or losses that you experienced with the direct result of the incident. So while a lot of money has come into the business, it was literally paying for things like $8 million to clean up the Napier site. And for all of the increased costs that we had in terms of flying people around the world to try and rebuild a supply chain. So I think it's just -- it's easy to see money coming in and go, "Oh, God, what are you guys doing with this?" Well, that's actually just stopping going out of business. That's what it's designed for. Okay. Sorry, we've got a question, [ Coralie ] in the front.

Thank you. I like what Sally Thompson said about advertising and marketing. But the name Godfrey Hirst keeps coming up. And I was very glad I never went into the Feltex float. That was quite scandalous. And Hirst came along like a vulture and picked up their assets for nothing. Well, that's how I remember it, unless you correct me.

I was not here at the time...

Right. Well, this company started with 2 families and wonderfully wool crafted carpets. And you need to get back to the basics, the warm fuzzies. Lovely fluffy white sheep sitting on Bremworth rug would be a nice photo on your cover next year. Back to the basics.

Noted. Thank you. So do we have any other -- do we have any other questions? Did you have a question, sir? No, all good. Any other questions before -- yes?

My name is [ Peter Rowe ]. I'm a shareholder. My question really is on -- I've been a shareholder for quite some time. I can remember the good old days when the -- we had this question about should we be in [ stallion ] wool and synthetics, et cetera, et cetera, but it's almost like the whole circle has changed. I really sort of -- over the period of time now, does Bremworth have a strong enough point of difference between the other companies involved in the market? It's a very small share, any market share per se anyway. But I just feel that, from what I sense, that there's nothing compelling to say, "Hey, we are much better than everybody else," and everybody flocks into -- and sort of want to buy Bremworth. And the other question I just thought of, last year, we had the meeting here with the suggestion of this -- this design center was going to be maybe a lead or a suggestion of some other way of -- or if this was successful, it may be going to other locations as well. Is that the case?

Yes. So I think, look, the term -- in terms of, is Bremworth sufficiently differentiated from other players? Look, I think certainly it is from a brand perspective, notwithstanding the fact that we clearly got some variable feedback on some issues. But if you look at our overall brand performance, we remain the most trusted brand by a mile in the carpet space. We know from research that we do around retailers that customers coming in and asking for Bremworth by name has been growing in the last 3 years since we started this wool-only campaign. So those metrics, they're leading metrics, are actually very positive for the business. And I think we have a number of retailers here today. Happy if you've got another viewpoint.

Ian MacDonald, Board Chair of Flooring Xtra and Director of Flooring Xtra of Wanaka. Do they have a point of difference? I think a lot of the time is the point of difference is the person selling the product. So staff-wise, what would our staff want to sell? They want to sell Bremworth. The quality of Bremworth is exceptional. And I actually say Bremworth are obviously rock stars. Yes, they've had some issues over the last few years, but their product is, by far, the best product we sell. We sell a lot of product, wool and nylon. As, I think you all know, nylon used to be -- well, wool used to be 80%, nylon was 20%. That moved around to nylon being 80%, wool 20%. Over the last couple of years, wool has grown substantially. And our ratio now would be -- Tom is probably better to answer.

Pro probably 70-30 wool.

So we're seeing a change. And most of the wool carpets we sell are certainly Bremworth because our staff have a confidence in selling that product.

Thank you. Thank you for that. Appreciate it.

I'll answer the second question, just in relation to the brand experience stores. I touched on what we're learning from them, but I want to be very clear that our focus is on being an efficient manufacturer of a top-quality product and a key wholesale partner to our wholesale channel. We need to serve those customers well because, as you heard Ian and his team at Wanaka and also the Flooring Xtra team and all the other groups that we are participating with are really the key to success. So we're focused on those 2 things: manufacture great products and have really long, deep partnerships that are trusted and win-win with our wholesale partners. That's the way Bremworth will get back to dividends fast.

Sir, yes or no?

In relation to?

It's not a priority for us at the moment to open another brand experience store.

Sorry, you just need to -- you just need a microphone. Otherwise, it just looks like you're doing this to the people in the background.

So was that -- because last time you said this was a -- to see whether this would continue as something else, or maybe it would be helpful and beneficial to grow and get other awareness, from whom I'm not too sure. But is it going to continue? Or was -- you're going to go a different direction?

It's not continuing in this financial year, and it's not a priority for us. I just want to be clear that it's achieving what we believed it and we hoped it would achieve. So we're pleased with that, but our focus is manufacturing and wholesale partners.

If we hadn't had the big challenges we had last year, obviously, we may well be in a different position, but we're cutting our cloths as, essentially, we've got, frankly, available to us. Yes.

It almost seems like growing -- making the market aware sounds fantastic, but does that convert to dollars and cents so you can grow where you give a dividend?

Yes. Well, I mean you have to say -- look, over the last number of years, we've contributed to making the wool story a compelling story. So customers are clearly going in and asking our retailers for a wool product. And our first job was to kind of do a category story for wool, and then at the same time, do a brand story for Bremworth. And both of those are working. Clearly, it's very muddy when you look at post cyclone without stock, et cetera. But I have to say, in the year we have ahead, we're actually feeling very confident that the plans will land, and we will pay a dividend.

I don't think widely, because, actually, Australia, but hopefully, it improves.

Well, it's full of Australians.

Who want to buy a carpet.

Thank you. All right. Any online questions indeed, yes. [ Gareth ]?

The first question has 2 parts. Why have a performance plan which issues new shares when your long-suffering shareholders haven't had a dividend in years? And the second part to that is, if you insist on LTIs, could you please purchase those shares on market rather than further diluting existing Bremworth shares buy-on market and have the shares in treasury stock?

Yes. Okay. Thank you. Two responses to that. One is it's a pretty well-known and accepted way to actually incentivize the executive team is to align their interest with those of shareholders. So I don't think we've actually issued any stock, treasury or -- well, we have issued treasury stock, but we've not actually issued any actual stock to our executive team over the last couple of years, simply because the performance hasn't been there. But that is something that we remain committed to. As far as issuing treasury stock or buying on market, our preference is to issue treasury stock, simply because of the NZX rules and restrictions on the timing of being able to actually buy shares on market, means that it's almost impossible for us to do that in an efficient way as far as it pertains to a staff share scheme.

The third question from Paul. Are you currently trading profitably in terms of NPAT?

No would be the answer.

Fourth question from Paul. Are there any cost-out initiatives planned to achieve more profitability?

Yes, there will be. Greg, any thoughts on that?

No, I don't have anything more to say, apart from, yes, there are. And we've cut our cloth to what is required to achieve profitability as quickly as possible and achieve a dividend full year '26.

Thank you.

No further questions.

Great. Thank you. Okay. In terms of resolutions, I'd now like to move to the resolutions before the meeting. These were provided in the Notice of Meeting and explanatory notes have been provided. Voting, as I have said, on each resolution will be by way of poll. And only shareholders who have yet to vote, proxy shareholders or representatives of a corporate shareholder may vote on today's resolutions at the meeting. And we'll take questions on each resolution as they are put to shareholders. So the first resolution is, in fact, the reelection of myself as a director of the company. Before shareholders vote on this, I'd like to say a few words in support of my reelection, and then I'll call on John Rae to take over the meeting and handle this matter on my behalf. So I am George Adams. Good afternoon, shareholders, and I'm offering myself for reelection to the Board today. I'm a fellow of the Institute of Chartered Accountants and a chartered fellow of the Institute of Directors. And I do have considerable experience as a Senior Director in various governance roles since 2014. I joined Cavalier in 2018 and was elected Chair in 2020. And over the past 6 years, while I've come to really appreciate the history and the heritage of Bremworth, I am impatient for results. As I said in my address, I'm committed to building a company that is important to our customers, desired by end consumers an admired by the market, that delivered shareholder returns consistently. Over the past 3 years, we have successfully built a brand that strongly resonates with consumers. And with our enormous supply chain difficulties now resolved, we must make progress commercially. And I'm committed to ensuring this happens, and that we deliver strong returns to you, our shareholders. Thank you for your consideration today. John?

I have the pleasure in moving that George Adams, who retires and who is eligible for reelection, be reelected as a Director of the company. I advise that the directors unanimously support George's reelection, and I would like to add that as Chair, George continues to be a positive driving force for growth and transformation at Bremworth. Board and management are grateful for his clear vision and direction. Also notable, George has been recently nominated as Chair of the Year. So we're actually very grateful to have his contribution to Bremworth. Are there any questions in regard to George's reelection? Any online questions, guys? All right. Could shareholders please now vote on the resolution? And once they have done that, I'll hand back to George. [Voting]

Thank you, John. The second resolution is the exciting one, to authorize the directors to fix the auditor's remuneration. I move that the directors be authorized to fix the remuneration of the auditors. Are there any matters for discussion or questions from shareholders on this resolution? No. Thank you. So could I ask shareholders now to please vote on that resolution. [Voting]

This concludes the resolutions for today's meeting. I will declare voting closed very shortly. So if you are in the room or are online and are considering voting, now would be the time to do that as I will give you a few seconds to complete the resolutions as appropriate. Voting on today's resolutions is now closed. The results will be released to the NZX later today and will also be available on the company's Investor Center website. Computershare will now come around to collect your voting forms from those present in person in the room. In the meantime, please note that the company has received approximately 15.7 million proxy and [ partial ] votes representing approximately 22% of total shares with approximately 92% of those in favor of each of the 2 resolutions. So we now move on to any other business from shareholders. Are there any further or final questions from shareholders? Thank you. I now declare the meeting closed. I'd like to thank our shareholders for your continued support. And to reiterate, that we remain excited and optimistic that the work we have done over the past 18 months to reset the business will provide a successful future for Bremworth. Thank you all for coming. Thank you.