Lindsay Australia Limited (LAU.AX) Earnings Call Transcript & Summary

My name is Ian Williams. I'm the Chair of Lindsay Australia. Welcome to all of those who have joined us in person and online for the 2025 Annual General Meeting of Shareholders of Lindsay Australia Limited. Firstly, in the spirit of reconciliation, Lindsay Australia acknowledges the traditional custodians of the country throughout Australia and their connections to land, sea and community. We pay respects to their elders, past, present and extend that to all Aboriginal and Torres Strait Islander peoples here today. The Board has determined to conduct today's meeting both in person and virtually for ease of participation by all shareholders. Today's meeting has been convened in accordance with the company's constitution and the Corporations Act. A quorum for this meeting is two shareholders present. As we have a quorum, I declare the meeting open. On behalf of the Board, acknowledging the ongoing success and growth of the Lindsay business, I'd like to thank all the Lindsay staff for their dedication and commitment to the company. Your efforts are fundamental to the continued success of Lindsay -- of the Lindsay business. Over the course of the last financial year, Lindsay made 2 acquisitions that expanded the Lindsay network with SRT Logistics in Tasmania and GJ Freight in Western Australia. CEO, Clay McDonald, will provide further details on these developments, among other subjects in his business update shortly. We are joined today by the Board of Directors, Stephen Cantwell, if you could maybe indicate who you are; Robert Green; and two new directors, Rodney Boys and Robert Miller, to which we extend a warm welcome. Rodney Boyes joins the Board as an experienced Senior Executive and company Director, bringing with him more than 30 years of industry relevant experience. Robert Miller joins the Board following Lindsay's acquisition of SRT Logistics, having built SRT Logistics from the ground up to be the market-leading business in Tasmania. He joins the Board with decades of operating experience, and we welcome you, Robert. Also present today, Clay McDonald, CEO, you should know Clay; Broderick Jones, General Counsel and Company Secretary; Justin Green, Chief Financial Officer and Company Secretary. A lot of Company Secretaries here. Other members of the Lindsay management team, many also shareholders, we welcome you as well. We also have present Jason Evans, representing the company's auditors, Pitcher Partners, and Jason is available for any questions. Question, for shareholders, appointed proxies and corporate representatives attending the meeting in person, at the conclusion of each resolution, there will be a short pause to allow for any questions. Please raise your hand, and we request that anyone wishing to speak, please identify yourself to the meeting. For shareholders' appointed proxies and corporate representatives attending the meeting virtually, questions may be submitted online. [Operator Instructions] Written questions may be submitted -- sorry, written questions submitted may be dealt with at the appropriate time during the meeting or may be moderated or amalgamated if we receive similar questions. [Operator Instructions] If you have any questions using the system, please return to the virtual platform and submit a written question. There are no apologies received for today's meeting, and we might move to Slide 5, voting on resolutions. So pursuant to Rule 16.3 of the company's constitution, the resolutions to be considered today will be determined by poll. Votes cast at this meeting will be added to the proxy votes to determine the outcome of the resolutions and the final results submitted to the Australian Securities Exchange. Any person who has already lodged a proxy vote is not permitted to vote again. I can confirm that 351 valid proxies for 103,667,317 shares, which represents 28.44% of the total number of shares on issue have been received. Slide 6, voting on resolutions. If you are eligible to vote on a resolution at this meeting, you may do so at any time via the online platform. Select the Vote icon and the voting options will appear on your screen. Select your vote choice and a tick will appear to confirm receipt of your vote. You may amend your vote until voting closes at the conclusion of the final item of business, and I declare the polls closed. I now declare the voting open on all items of business. Before we move to the formal resolutions, I'd like to take this opportunity to introduce Clay McDonald to provide a business update. Thank you, Clay.

Thank you, Ian, and good morning, everyone. I'd like to extend a warm welcome to all shareholders both here today and joining us online. FY '25 was a year that emphasized the resilience of our business model and the discipline of our strategy execution. Despite a challenging operating environment marked by elevated industry capacity, weather disruptions and flat consumer demand, Lindsay Australia delivered revenue growth, expanded its national footprint and continued to execute on its transformation agenda. Group revenues increased by 5.6% to $849.8 million, predominantly supported by organic growth and market share wins across both our Transport and Rural divisions. Underlying EBITDA of $81.4 million was down 11.7%, in line with guidance, reflecting supply chain disruption and margin compression, particularly in the Transport business. We invested $50.8 million in fleet infrastructure and strategic initiatives to unlock bottlenecks and support efficiency improvements while keeping net leverage below our -- within our target range, sorry, of 1.53x. The Board declared a fully franked final dividend of $0.015 per share, bringing the full year dividend to $0.038 per share, representing a 54% payout on an underlying basis. In Transport, revenue, excluding fuel levies, rose 5.9% to $500 million. Seasonally impacted horticultural volumes were offset by growth in both the grocery and high-value dairy and protein categories. Whilst margins were impacted by competitive and cost pressures and seasonal volatility, our multimodal strategy and integrated Rural and Transport service model continued to differentiate us in the market. In April, we completed the acquisition of GJ Freight, providing access to the expanding Southwest WA freight and horticultural markets. GJ provides quality freight services and packaging supply in that region, and we are in the process of now building out a Lindsay rural offering. Increased freight flows from Southwest WA and potential growth opportunities will be supported through our new Perth facility, which opens in November. Previously a bottleneck for growth. The new site is a purpose-built 35,000 square meter facility, supporting both refrigerated and dry operations. We are particularly excited by the growth potential this expansion, modernization and consolidation opportunity will unlock going forward. Hunter delivered revenue of $110.2 million, up 26.1%. And underlying EBITDA of $3.6 million, up 9.6%. Growth was supported by the acquisition of two additional Rural stores, the introduction of packaging solutions into the Shepperton region and an additional month's trade. With the retirement of Michael Maroney, our GM of Rural, Chris Kerton will assume responsibility for Hunters with a focus on operational improvements to enhance customer service and returns. In Rural, revenue increased 8.7% to $165.5 million, with underlying profit before tax up 10.7%. Rural achieved their second-best result in their 40-year history. And this was on -- and the growth was driven by market share gains, good cost control and margin expansion in key products underpinned by our packaging product. Staying with Rural for a moment, we are delighted to announce the extension of our packaging distribution agreement with Visy Board for a further 5 years. Under this agreement, Visy will continue to supply packaging products in support of Lindsay Australia's product and service offering to its horticultural customers out to 2031. Lindsay Australia will also continue to supply logistics and transport services to Visy, which offers significant operational synergies for both companies. The Visy partnership is an important input to the Lindsay unique integrated operating model, and we look forward to the continued success into the future. The Lindsay Australia strategy remains focused on three key pillars. First of all, grow the network. FY '25 saw us enter three new regions, Southwest WA, the Goulburn Valley region of Victoria and Tasmania. These expansions are earning accretive and provide both revenue and cost synergy opportunities. Our strategy remains Transport-led with Rural and packaging providing integrated opportunities to maximize customer value and shareholder return. Post year-end, we completed the acquisition of SRT Logistics, providing entry into the attractive and complementary Tasmanian refrigerated transport and Trans Bass sea freight markets. SRT is Tasmania's largest refrigerated carrier with a renowned reputation for safety, service and reliability. The acquisition will further diversify the company's operating base by geography, customer and service type, building earnings resilience and extend and connect revenue opportunities. The deal is highly accretive for shareholders with a 15% EPS uplift on a FY '25 pro forma basis. Our second strategic pillar is transformation. The transformation program is embedding operational efficiencies, improving asset utilization and leveraging Lindsay's procurement scale. The program is delivering early wins and remains central to our margin recovery and long-term competitiveness. We have invested heavily in unlocking property bottlenecks over the last 3 years. And with the exception of Bundaberg, the property upgrade and refresh cycle is fundamentally complete. We remain confident in the positive long-term fundamentals of the essential refrigerated freight market, and this investment has created additional operating leverage for future growth. Efficiently utilizing this available capacity and continuing to focus on capital deployment will support our focus on a midterm ROIC range and target of between 15% to 20%. And finally, we have a strategic focus on people and performance. There's a range of initiatives progressing in this pillar. However, the highlight of the year was the securing of a new 4-year enterprise agreement covering around 1,800 employees, ensuring workforce stability and alignment with our growth aspirations out to 2029. The EA was agreed without impact to business operations and supported by strong voter participation and support. Safety is a core value and non-negotiable focus of the business. Whilst we achieved some marginal improvements in lag indicators this year, we did see an uplift in lead indicators and compliance performance, particularly in fatigue, distraction and overspeed events. In our Transport fleet, we are rolling out additional safety standards, including side underrun barriers and 4-way cameras. In addition, a mobile hazard compliance and training app was launched and will support -- this will support our greater -- support greater safety and capability improvements across the enterprise. It's been a big 12 months for our information technology team. We're delighted to announce the arrival of Cameron Stone as our new Chief Information Officer. Cameron is the former CIO of Virgin Australia, TEG Ticketek and the Heavy Vehicle Regulator. His appointment and subsequent recruitment and development of additional capability in the IT department is our signal intention to be stronger advocates and adopters of value-creating technology. The transport and logistics sector is fertile ground for IT-enabled efficiency and improved customer connection. In many cases, the technology already exists and the opportunity to be more efficient is evident. The missing piece for Lindsay was transformational capability and expertise under -- which under Cameron's leadership, we are now accumulating. This year, we commenced a partnership with CyberCX to improve our security, resilience and monitoring of our operating systems and infrastructure. This investment aims to protect the integrity and reliance of our systems for Lindsay and its customers and enhances our ability to resist, respond and recover to an increasing threat environment. Looking ahead, we are focused on the following key areas: first of all, ensuring the effective integration of SRT and Lindsay. We're delighted with the early progress we have made in combining the two businesses and creating additional value through operations, commercial and capital opportunities. The two teams are working well together with resource sharing and combined offers already being delivered. A significant upside to the combined business has been the additional operating and leadership capability that has joined our business, and we welcome their entire workforce of over 400 staff to the Lindsay business. Secondly, as previously outlined, we will focus on embedding and extracting value from the GJ Freight acquisition in parallel with removing the Perth depot bottleneck by the opening of our new Hazelmere terminal in November. And thirdly, we will continue to focus on transformation and doing things more efficiently, driving margin recovery through cost discipline, load balancing and better capital deployment. In conclusion, FY '25 demonstrated our ability to stay disciplined and focused in a tough operating environment. We grew revenue, expanded our footprint, creating operating leverage and strengthened our integrated model with the understanding that the long-term fundamentals of the market in which we operate remain positive. Whilst we expect the operating conditions to remain competitive in FY '26, we are excited by the opportunities created by the acquisitions, the momentum generated in the transformation program and the ability of our people to remain focused on delivering sustainable value for shareholders. Thank you.

Thank you very much, Clay. I now turn to the business of the Annual General Meeting. The Notice of Meeting and the Explanatory Memorandum, together with the proxies were lodged with the ASX on the 3rd of October 2025. Physical documents were dispatched to shareholders by 4 October 2025, and I propose to take them as read. The directors' report, the annual financial report and the report of the auditor for the year ended 30 June 2025 were lodged on the ASX on the 25th of August 2025 and also dispatched to shareholders by 4 October 2025. The first item of business is to receive and consider the financial statements and reports of the directors and auditors for the year ended 30 June 2025. Firstly, are there any questions in the room from the floor? Doesn't appear to be. Are there any questions submitted online?

Ian, there's a couple of general questions submitted earlier from [ Mr. May ]. Maybe Clay is better positioned, first one relates to staff. How many full-time equivalent staff do we currently have? And is this likely to fall over the coming 12 months with the rapid rollout of AI? Which parts of our business and operations are most prospective for AI productivity gains and how energetically are we embracing those opportunities? That's the first question.

Thank you for your question. Answer to the first part of that, we have around 2,200 FTE equivalents. In regards to the adoption of AI, I think we covered that kind of in my narrative there around the recruitment of Cameron Stone into our business. So we currently do not have any sort of AI technology being rolled out currently, but we are looking at enhancing our core systems to ensure that we've got the right base system that if there's any AI efficiency that can be used, we can adopt that -- those systems. It would most likely be used in more capital efficiency kind of deployment wise that is kind of route optimization, load optimization, those types of opportunities through the Transport supply chain.

Before you go, Clay, to the second of the general questions, there's another one. Second question is, at last year's AGM, there were 253 proxy votes lodged representing 12.93% of issued capital. This year, that's increased to 351 proxy votes representing 28.44% of issued capital, which is still lower than most companies. Did you change the communication strategy to encourage more shareholders to vote? And have there been any material protest votes today? Are we covered by any proxy advisers? So the first part of it is a commentary on the increased participation in proxy votes. The second part of it is whether there's been any material protest votes, which there has not. And the third part of it is, are we covered by proxy advisers, which we are not.

All right. Perhaps I can do that. I think obviously, there's a change with Clay coming in 2.5 years ago. That has meant almost 50% of the shareholders, at the time you were appointed, are no longer shareholders, and we've got a new 50% shareholding. So we've spent a lot of time and effort getting to know those. We certainly -- the management team and the Board are interacting with our top 10 shareholders on a regular basis. And I think that probably reflects the increase in proxies from some 12% to 28.44%. I think [ Broderick ] has confirmed, we're not aware that any of the proxy advisers cover us. We're hoping in the near future, they will be covering us, which is both a good and a challenge. There was one other, sorry.

Got you. new directors, Rodney Boys and Robert Miller along with the Chair, comment on the recruitment process that led to these two new [indiscernible] to the Board? Was a headhunter involved? Did the full Board interview any other candidates? And did Rod or Rob know any of our directors or executives before engaging with the recruitment process?

So I think the previous -- there are no material process [indiscernible] the third. Look, Matthew Stubbs, who contributed a lot, decided to -- that it was probably time for him to pursue another Board opportunity. He came for about 4 years. He felt that he made his contribution. And so sort of midterm, we decided to have a slight overlap in sort of May, June. I had been introduced to Rodney as a potential candidate, not for this, but perhaps a number of Boards. Rodney then spent some time with all the directors, one-on-one. And when you look at his professional career through his time at Wesfarmers, exposure to rural, exposure to transport whilst the CFO at Australia Post. And most importantly, he was available just starting his nonexecutive career. And the Board made a decision that it would strengthen our risk function, which had really only started to develop in a more formal way in the last couple of years. And so we were all comfortable that Rodney had the availability, the energy and the intellectual, a great fit in terms of personality, and the Board did not engage any recruitment firm in relation to his appointment. In relation to Robert, obviously, that was part of -- we've called an acquisition, but in reality, it was a merger with SRT, and that's the way we feel emotionally internally. And we are looking for feedback from shareholders to be where we could perhaps do with more operational experience and someone who's run his own business and understands that for 30 years was well qualified, and it was part of the merger negotiations.

I'll just open it up to Rodney or Robert, if you wanted to add anything because the question is directed towards [ two of you. ]

I think, the Chair has covered it very well. So...

Look, I think from my point of view, as was explained how I arrived here. But I think from a recruitment point of view, probably the due diligence process of a company acquisition and picking up every stone and looking at it. I believe that [indiscernible] brought a lot of confidence to the Board that [indiscernible].

There's another question, it can come under...

Okay. We might go to the first resolution then which is the director reelection for Stephen Cantwell. The resolution is that Stephen Cantwell, who retires by rotation in accordance with Rule 19.3 of the company's constitution, and being eligible, offers himself for reelection, be reelected as a director of the company. So we're done with that. Second -- sorry, second resolution relates to the reelection of Robert Green, that Robert Green, who retires by rotation in accordance with Rule 19.3 of the company's constitution, and being eligible, offers himself for reelection, be reelected as a director of the company. Are there any questions from the floor? Are there any questions submitted online? Okay. Thank you very much. The third resolution relates to director election for Mr. Rodney Boys. The resolution reads that Mr. Rodney Boys, who was appointed to fill a casual vacancy, retires in accordance with Rule 19.2 of the constitution, and being eligible, offers himself for election and so be elected as a director of the company. Are there any questions from the floor? Any questions online? No? Terrific. The fourth resolution relates to director election for Robert Miller. The resolution reads that Mr. Robert Millner, who was appointed -- Miller, sorry, excuse me, misspoke there, who was appointed to fill a casual vacancy, retires in accordance with Rule 19.2 of the constitution, and being eligible, offers himself for election, be so elected as a director of the company. Are there any questions from the floor? Are there any questions submitted online? Resolution 5 relates to the adoption of the remuneration report. The resolution reads that the section of the report of the directors in the 2025 annual report dealing with the remuneration of the company's directors and senior executives be adopted. Are there any questions from the floor? Are there any questions online?

Chair, we have one [indiscernible] share price down 38% [indiscernible]

Yes. Thank you for your question. I'll start with, first of all, our role on developing a strategy that will be successful in the market. So we've developed that strategy, and we're executing that strategy in a very competitive environment in FY '25, we thought we did a pretty good job on that as extend the network transformation performance and people, and we've gone through some of the highlights for the year. So on the share price side, the macro conditions and share price variability is something that I necessarily don't focus on as much as -- things I can't control. I do focus on the things I can control, which is running the business really well. So was there another part to that question? Okay.

And maybe I could just supplement Clay's comments. I feel like in the last period, we've really built the foundations for an enduringly successful business, made the investments where we needed to. We've got great facilities now. We've got a very good senior executive team that's settled, and we're calm and executing. But there's the opportunity to deliver and deliver for us and deliver for shareholders over the next 12 to 18 months. All right. Sorry, any other online questions?