IVE Group Limited (IGL.AX) Earnings Call Transcript & Summary

Good morning. I'm James Todd, Chairman of Board of IVE Group Limited. Before we begin, and on behalf of all of those present, I'd like to acknowledge the Aboriginal and Torres Strait Islander peoples as the traditional custodians of the land on which we live and work, and pay my respects to Elders, past and present. I'm delighted to welcome you to the Annual General Meeting of Shareholders of IVE Group Limited. The time is now 10:00 a.m., and as we have a quorum of members present, I declare the Annual General Meeting open. Joining me today is our Managing Director, Matt Aitken; and our Directors, Gavin Bell, Sandra Hook, Paul Selig, Cathy Aston and Andrew Bird. We also have Darren Dunkley, our CFO and Joint Company Secretary; and Sarah Prince, our Joint Company Secretary. I welcome representatives from our auditor, KPMG. KPMG will be available to answer any questions you may have about the conduct of the audit. I would appreciate it if all mobile phones can be turned off or put on silent. I'd also like to let you know that the emergency exits are clearly marked outside this room. Before we proceed to the formal business of the meeting, I will give a short address, and then I will ask Matt Aitken, our Managing Director, to address you. IVE Group delivered another strong outcome for shareholders in the 2025 financial year. Underlying net profit after tax increased by 21.1% to $52.1 million, underpinned by a further material uplift in operating margins, primarily reflecting the emergence of Ovato and JacPak cost synergies, coupled with continued cost discipline. The Board declared a final dividend of $0.085 per share, resulting in a full year dividend of $0.18 per share, unchanged from the prior year and consistent with guidance. This represented an underlying dividend payout ratio of 53.4% below the group's historical 65% to 75% dividend payout range with the incremental funds retained used to fund the on-market share buyback and pay down senior debt. In addition to driving strong financial outcomes, key areas of operational focus during the year included: capitalizing on the group's entry into the Australian fiber-based packaging sector by selling JacPak's available revenue capacity and furthering the group's ambition to develop a complementary New South Wales packaging plant in Kemps Creek, Sydney; expanding IVE's national 3PL capacity via relocation to a new and significantly larger Victorian facility in Dandenong South; development of a Sydney supersite in Kemps Creek enabling consolidation of multiple sites to deliver operating efficiencies and capacity for expansion; the continued growth and development of Lasoo; and implementing the group's sustainability strategy. Since listing on the ASX in 2015, the group has undergone significant change. Revenue and net profit have almost trebled underpinned by IVE's consolidation of existing market segments, coupled with expansion into marketing and communication adjacencies, which has driven a significant increase in the breadth and depth of the group's offering. In June 2025, the group hosted its first ever strategy session to provide investors with an update on current operations, while at the same time, providing an insight into the group's direction, including the group's recently launched Now to 2030 strategy, targeting $1.2 billion to $1.3 billion worth of revenue. The session was well attended and well received, with investors gaining a better understanding of how IVE intends to capitalize on the key trends shaping the marketing and communications landscape to accelerate growth in the coming years. With the release of the group's interim result, reflecting Board and management's view that IGL share price offered significant value, in February, the Board initiated an on-market share buyback of up to $10 million, which to date has resulted in the cancellation of around 1.1% of issued capital at an average share price of $2.52 per share. The buyback remains in place with a further $5.7 million of available capacity. While the group has guided to an unchanged full year dividend of $0.18 per share in FY '26, the Board intends to return to a dividend payout ratio based upon a 55% to 65% of underlying earnings. Noting that 4 Directors, including myself, have been on the Board since IVE's ASX listing in 2015, and with the group, having recently launched its ambitious Now to 2030 strategy, it is timely for the Board to undertake an effectiveness review over the year ahead as a precursor to a Board refresh commencing in FY '27. This follows material changes to Board governance over the past year precipitated by the tragic passing of Geoff Selig, with Chair and executive responsibilities separating -- separated, resulting in Matt Aitken joining the Board as a Group CEO and Managing Director. Paul Selig's recent transition from executive to Non-Executive Director completes the group's evolution to a customary governance structure. To encourage greater equity ownership and drive improved alignment with shareholder interest, during the year, the Board introduced new shareholders -- new share ownership guidelines, including minimum shareholding requirements for Directors, KMP and senior executives. An Employee Salary Sacrifice Share Plan has also been established to encourage greater staff equity ownership. Given the recent step change in earnings, the 2026 financial year is likely to be a year of consolidation, as we transition into the next phase of the group's growth trajectory consistent with our 2030 strategic ambition. In addition to offering ample funding for organic growth opportunities, the group's increasingly strong balance sheet offers potential for further acquisitive growth, either adding scale to existing operations or new sources of revenue in additional product and service adjacencies. You'll hear about the group's recent acquisition initiatives in Matt Aitken's presentation shortly. In closing, I would like to thank the group's Managing Director, Matt Aitken; CFO, Darren Dunkley; a highly skilled leadership team, and our over 2,000 dedicated staff for an outstanding year and for their passion, diligence and commitment. Thank you also to my fellow Directors for their continued efforts, expertise and support. Finally, I would like to express my thanks to our shareholders, customers and suppliers for their contribution to IVE's continued success and for their ongoing support. Thank you. I'll now hand to Matt.

Thank you, James. Good morning, everyone. It's my pleasure to present to you today. In today's presentation, I'll recap our FY '25 results, provide a number of business updates and talk about the year ahead, both in terms of growth initiatives as well as our FY '26 trading update and outlook. Some of this content will already be familiar to some of you, as we've covered it in the release of our full year results only 12 weeks ago. So I'll move through those sections quickly and focus more on the business updates, growth initiatives and outlook. Before we move into the more formal part of the presentation, I'd like to start with our 2025 reel, which illustrates the breadth and depth of the products and services provided by IVE over the last 12 months, the great work that we do for our clients and the awesome brands that we've worked with. [Presentation]

And the thing that some people want have thought we were only a print company. So hopefully, that gave you a broad understanding of what's been happening on our plate in the last 12 months and some of the great work we did. I just wanted to start with the key highlights. From a financial performance perspective, all key profit metrics were up significantly on the prior year, underpinned by strong margin expansion, continued high operating cash conversion with working capital remaining stable, and the balance sheet was further strengthened with gearing now well below our internal target. From an operational perspective, the Ovato cost synergies have now been fully realized as have the JacPak cost synergies, and we continue to make strong progress against our sustainability road map. But in terms of the growth initiatives, JacPak packaging revenue continues to grow with new customer wins like PepsiCo, Peters Ice Creams and [ McCormick ] Foods just to name three. And we have the New South Wales packaging expansion well in train as part of the Kemps Creek supersite project, which I'll talk about later in our presentation. Our 3PL business relocated to Dandenong South in July, providing significant additional capacity and operating efficiencies, while the Sydney supersite consolidation at Kemps Creek remains on track for completion in early 2026. Lasoo continues to demonstrate strong momentum with key metrics tracking well and the business remaining on track to breakeven during FY '28. And again, I will cover this in the coming slides. Looking at the numbers in more detail for FY '25. It was a strong performance underpinned by margin expansion and continued high operating cash conversion. Revenue was just under $955 million, up 1.6% on PCP; with EBITDA of $136.7 million, up 7%; and NPAT of $52.1 million, an increase of 21.1% on FY '24. Earnings per share increased 20.3% to $0.337, and operating cash flow remained strong at 101.9% of EBITDA and net debt reduced to $114 million for the period. The Board maintained a full year dividend, as James mentioned, $0.18 per share fully franked, stable on the prior year. And the key driver of the earnings improvement was a material gross margin uplift, which increased from 49.3% -- sorry, increased to 49.3% from 46.7% in FY '24, reflecting our continued focus on mix of work, pricing discipline, procurement and operating efficiencies. Putting the FY '25 performance in context, the improvement in earnings translated into stronger returns across key performance metrics. As I mentioned, NPAT increased from $43 million in FY '24 to $52.1 million in FY '25, with the NPAT margin improving from 4.6% to 5.5%. Return on funds employed strengthened from 22.2% to 24.9%, and return on equity improved from 25.6% to 28.3%, both reflecting disciplined capital deployment and the benefits of prior year investments. This consistent improvement in returns demonstrates the operating leverage in the business and the success our integration and efficiency programs have had over the last few years, particularly since COVID. The dividend per share has been held flat in recent years, balancing an already attractive yield with the flexibility and fund or -- sorry, balancing an already attractive yield with the flexibility to fund organic growth, recent acquisitions and ongoing capital management initiatives. Moving forward, the company intends returning to a more traditional dividend payout ratio-based policy, which I'll touch on later in the presentation. I'll now move to the growth section of the presentation and cover the key initiatives that are driving our strategy through to 2030. Starting with 3PL, which continues to be a major growth driver for the business with a strong growth in IVE's 3PL operations and pending expiry of 3PL leases in the main warehouses of Braeside, Victoria. We relocated our 3PL Victorian business to Dandenong South, a purpose-built facility in July 2025. The 33,000 square meter facility is our largest 3PL site in the country, and the move provided an additional 60% of storage space for growth in Victoria and overall, an additional 30% on our national footprint, which is now some 80,000 square meters. There's a range of benefits to be realized from that supersite. The additional space as I said, for expansion, dedicated in-house logistics services for JacPak, which since acquisition have had to be outsourced due to capacity constraints, operating efficiencies through the consolidation of what were 2 warehouses in the Bayside now into 1 shed in Dandenong South, including common operating functions such as receiving a dispatch and reduced duplication of resources and equipment. Sort of touch on a few clients that have signed on with us in the first half in this part of our business to give you a flavor for some of the companies we're working with and the products we're managing. Maxisafe is a national safety business. We are now storing product for Maxisafe right around the country, including in markets like Perth. [ AusTender ], we are storing the thousands of pellets of rice and spices for AusTender and distributing those to Coles, Woolworths and Costco for them. Stewart Alexander, a huge food and confectionery company that we are storing the point of sale for, given that we manufacture it and make it for them today. And someone like [ Vocus ], who are a specialist supplier in the data center business and require a 24/7 operation and solution in that 3PL space to support what they need to do in data centers as part of their business. Moving to the Kemps Creek project, which is a key strategic investment that will reshape our footprint in New South Wales. We are replicating the success of our Braeside site in Victoria, our 42,000 square meter supersite in Kemps Creek in Western Sydney, not far from the near Western Sydney Airport. This consolidation facilitates the group's strategy of expanding into horizontal adjacencies such as packaging to drive revenue growth and operational efficiencies. The business units that we are relocating to Kemps Creek are coming from Homebush, from Silverwater, from Granville, from Warwick Farm, and we are building a brand-new packaging facility in that site, as we have stated previously as part of our growth strategy than packaging. The site is close to the transport hubs and IVE's Erskine Park and Huntingwood facilities, and thereby brings most of our Western Sydney teams much closer together in that space out there in Western Sydney. And the project, as I mentioned earlier, is on track for delivery in early 2026. Turning now to Lasoo, which continues to perform strongly and is a fast-growing marketplace in Australia. Lasoo is a unique platform with powerful capability where incremental platform scale enhances the value proposition for both customers and retailers. Key e-commerce platform differentiators include the fact that we have no exposure to risks and capital costs associated with traditional retail models. We also don't store any inventory on behalf of customers or retailers. We have a deep and dynamic product mix, providing exposure to all seasons, so the platform is not a business driven by seasonality, but clearly, we enjoy the upsides of Black Friday and Cyber Monday and end of financial year sales periods. We have best-in-class proprietary technology that is highly scalable, providing a sustainable competitive advantage. And we have a well-invested platform infrastructure primed for growth and to support the journey and the strategy that we have for Lasoo. It's capital light. It has a low-risk operating model. We have quality brands for quality retailers and a lot of special value deals on that platform not available anywhere else. And around 1 in every 5 deals is exclusive to Lasoo, so you can only find that deal on Lasoo, you won't find that anywhere else. We don't compete with the retailers. We grow with them. As I said, we don't range any of our own product up there or store our own product. And it's a unique user experience. It's the only platform with a digital catalog browsing capability, enabling users to save on retailers and best specials in one transaction. So if we look at some of the numbers, the platform has demonstrated strong growth metrics with a number of retailers live on the platform at the end of Q1 FY '26, up 47% on PCP; and unique users, up 38% on PCP for the same period. We now have over 370 retailers live on the platform with retailer churn below 3%, extremely low. And more than 300,000 product lines available live from a broad range of quality retailers and brands. Some of those retailers, including the likes of Bi-Rite, Lincraft, Barbeques Galore, Appliances Online, Stratco, products coming from people like Carlton & United Breweries directly, other retailers like Chemist outlet, Shiels and Decathlon just to name some. Lasoo is on track to deliver $3 million of gross transaction value in November, with sales now consistently exceeding $100,000 per day and fulfilling more than 12,000 orders a month across the country. The number of orders on the platform in Q1 FY '26 is up 71% on PCP and GTV, gross transaction value, from repeat customers is up 81% on PCP. With repeat customer GTV scaling at roughly twice the rate of total platform growth that clearly demonstrates strong customer retention and satisfaction amongst the users of the Lasoo marketplace. The business continues to enjoy excellent customer ratings. And as I mentioned earlier, we remain on track to breakeven during FY '28 as we head towards profitability in FY '30. As we look ahead to 2030, and James mentioned our Now to 2030 strategy a couple of times, we spent a lot of time with investors in June this year, taking investors through what we saw that 5-year strategy looking like. I wanted to update on that strategy deck that we presented and just cover off a couple of the key strategies that we talked about. One of those there was the appetite for bolt-on acquisitions, should they present themselves. So the first one is Impressu, which was acquired for $13.5 million, only a couple of weeks ago on the 4th of November. Impressu is a Brisbane-based print business, and it was owned by the listed entity of Domino's Pizza Enterprises, providing digital and offset print, direct mail and letterbox marketing, signage and point-of-sale warehousing and logistics solutions, so a value proposition in the Brisbane market that is very similar to that of IVE Group in our other markets. Long-standing clients mainly spend the quick service restaurant, retail, healthcare and public sectors with its largest customer, representing Domino's. Impressu is expected to contribute annual revenue of around $30 million, EBITDA of around $4.5 million, which will include the cost synergies and NPATA of around $2.5 million. In conjunction with acquiring Impressu of Domino's, we also signed a 6 plus 2-year contractor supply marketing services to Domino's moving forward. Those are the services that Impressu supplies them today, plus the opportunity for IVE to supply additional services to Domino's over and above what is already supplied by Impressu. So we think about things like uniforms, marketing technology, creative and content, more activations and the list goes on. There is a big opportunity for us to partner up with Domino's in an even more meaningful way moving forward. But I expect that contract to contribute over the first 6 years the minimum of $80 million of revenue to the business. The second acquisition is Budget Mail Services, which we acquired for $1 million of cash and liabilities, again, only a couple of weeks ago on the November 3, 2025. BMS is a small Sydney-based mail and communications business supporting clients in the share industry, charity, publishing and education sectors that had annual revenues of $5 million. And once we fully integrate it into our Homebush facility, we expect that to deliver annual EBITDA and NPATA of $1 million and $0.5 million, respectively, and the integration costs are about $0.5 million. And that integration is 2 weeks ahead of schedule. It will be complete by the end of November. So that integration is well on track. All customers retained, all staff retained, and has gone extremely smoothly, as has the acquisition up in Queensland. Now turning to the current year and FY '26 outlook. Year-to-date revenue has been softer than expected across the retail and media sectors, which has impacted, in particular, our catalog business through the first half of FY '26. Pleasingly, software subdued revenue has been partially offset by a further uplift in margins due to an ongoing focus on margin expansion and operating efficiencies. Our FY '26 underlying NPAT is now expected to be at the bottom end of the previously advised $50 million to $54 million guidance range. That guidance range does include a $2.5 million adverse after-tax noncash AASB 16 timing difference, which has been driven by the significant new long-term leases that will reverse over the life of those leases. So normalizing for that noncash item, the pre-AASB 16 guidance range is $52.5 million to $56.5 million, which compares with FY '25 result of $51 million on the same basis. There is no change to previously advised capital expenditure expectations, which are weighted towards Dandenong South, Kemps Creek and targeted growth and efficiency projects. And while the annual dividend is expected to rise steady at $0.18 per share in FY '26, thereafter the Board intends returning to a dividend payout ratio based on 55% to 65% of underlying earnings, which reflects the group's strong cash generation, balance sheet position and growth opportunities. Imposing the performance in FY '25 and the momentum evident in our key strategic initiatives reflects the dedication and commitment of our 2,000 people right across the business and right around the country. And I'd like to thank them for their ongoing contribution. Appreciation is also extended to our leadership team and to the Board for their support as we execute on an ambitious disciplined growth agenda. With a strengthened balance sheet, high cash conversion and a clear pipeline of organic initiatives and recent bolt-on acquisitions, the business remains well positioned for continued profitable growth through to 2030. Thank you. Good morning, and I will now hand back to our Chair, James.

Thanks, Matt. Ladies and gentlemen, we now come to the formal part of the meeting. Matters requiring resolution, which are outlined in the Notice of Meeting. The Notice of Meeting dated October 24, 2025, was circulated to members, and I will take the Notice of Meeting as being read. Before moving on to the various resolutions to be considered today, I will now briefly outline the voting procedures for our meeting. When you registered your attendance this morning, you would have been provided with an attendance and poll voting card. The voting on each of the resolutions will be conducted on a poll. As Chairman of the meeting and having been appointed as proxy for a number of the members entitled to vote, as detailed in the Notice of Meeting, I will vote where authorized all undirected proxies in favor of each resolution. I will also advise that voting exclusions as set out in the Notice of Meeting will be applied to each resolution. All the resolutions being considered today are ordinary resolutions requiring a simple majority of votes cast by shareholders present and entitled to vote on the resolutions. Resolution 3 is advisory and does not bind the Directors of the company. In order to provide you with enough time to vote, I'll shortly open the poll for voting on all resolutions. You'll be able to vote at any time between the start of the poll and the closing of voting as announced at the end of the meeting. We will give you a warning before we move to close voting at the conclusion of all items of the business. I now declare poll voting open on all items of business, please record your votes on your poll voting card at any time. Following the voting, general business questions will be taken, and I'll respond to questions received from shareholders in advance of the meeting. Just to let you know that we haven't received any questions in advance. So we'll be taking questions from the floor. We will now move to the business of the meeting. The 2025 annual report contains the financial report, Directors' report and the independent auditor's report. A copy of the annual report was made available on the company's website and was sent to those shareholders who requested it. The financial statements have been approved by the Directors and audited by KPMG. At this time, I'd like to take any general questions or comments about the reports or for the auditor. I note that the auditor did not receive any questions prior to the meeting. We'll now move to the resolutions for voting. I now move to the first resolution, which is to consider and if thought fit pass the following as an ordinary resolution of the company to reelect Andrew Bird as a Director. Further details about the resolution are contained in the explanatory memorandum that accompanied the Notice of Meeting. The directors, with Andrew Bird abstaining, unanimously recommend shareholders vote in favor of this resolution. The resolution is set out on the screen. Before I take any questions on this item of our business, I'll invite Andrew to speak to the meeting.

Thank you, James. Good morning, ladies and gentlemen. I'm very pleased to be standing today for reelection to the IVE Group Board. I first joined as an Independent Non-Executive Director in April of '22. And I'm also a member of the Board's Audit Risk and Compliance Committee. I have over 30 years of management experience both in large multinationals and high growth private businesses. My most recent executive role was the CEO of Morningstar, Australia and New Zealand, part of the U.S.-listed Morningstar Investment Research Group. Most of my career has been at the intersection of information management, analysis and publishing. So I feel very familiar with the dynamics at play in the industries in which IVE operates. More recently, I've been an active investor and Board member of a number of high-growth private businesses, mostly in the software and information management space. This give me a really good appreciation, I think, of what it takes to scale and grow and foster innovation in these types of businesses. Finally, I'd like to say that I'm a committed shareholder in IVE. My wife and I have acquired a bit over 500,000 shares over the last 8 years. And so I very much understand and appreciate the needs and considerations of shareholders in our company. Thank you very much.

Thanks, Andrew. I will now take questions on this item of business. There's no discussion. I now put to the meeting Resolution 1, and here are the proxies. Thank you. Please now select For, Against or Abstain for Resolution 1 on your voting card. [Voting]

I'll now move to the second Resolution, which is to consider and if thought fit pass the following as an ordinary resolution of the company, to reelect Gavin Bell as a Director. Further details about the resolution are also contained in the explanatory memorandum that accompanied the Notice of Meeting. The Directors, with Gavin Bell abstaining, unanimously recommend to shareholders, that shareholders vote in favor of this resolution. The resolution is set out on the screen. Before I take questions on this item of business, I invite Gavin to speak to the meeting.

Thank you, James, and good morning, everybody. I'm delighted to be standing for reelection to the IVE Board. For those that don't know me, I think I draw on 3 principal buckets of experience across my various careers to contribute to the Board. My first career was as a lawyer and then a partner of 1 of Australia's leading law firms and ultimately a leading global law firm. I then changed careers and became a CEO for a period of 9 years that included managing through the global financial crisis of a global merger, but probably more importantly, dealing with the whole range of issues that firstly come across the CEO's desk but ultimately end on a Board's desk. So I think I've seen those sorts of issues from the management table that allows us to bring that experience to the Board table. I then moved careers once again into my current career as a Non-Executive Director. In that space, I've had roles across a variety of different organizations and different industries. And I think I bring knowledge you get from those different industries and organizations to the Board table. Importantly, that back to career now includes quite a good period around the IVE Board table. I think that gives me a very strong understanding of the IVE businesses, but also the people, the approaches we take to those industries, but finally, the risk and opportunities that we now face. Finally, I've really enjoyed my time on the IVE Board. I think I've made a valuable contribution. I look forward to continuing to contribute as we pursue our 2030 plan. Thank you, everybody.