NAOS Emerging Opportunities Company Limited (NCC) Earnings Call Transcript & Summary

Obviously, this morning, I'll be speaking to the Q3 investor update for financial year '25. Some of you are probably aware we're using Zoom today. So we've obviously moved away from GoTo webinar. So if I stumble through this or if there are any issues, feel free to pop them in the Q&A tab and someone will fix those for me, or just send an e-mail through to [email protected]. But with a little bit of luck, there shouldn't be any issues, and this should be more seamless than what we've used previously. Just moving along, there's a lot of ground to cover today. Q3 was probably one of the most eventful quarters, I think, in recent memory and one of the most recent for NAOS. From a disclaimer point of view, as you all know by now, everything I refer to is for general purposes only. None of this should be construed as financial advice. Clearly seek your own financial advice from a professional that takes into account your own personal circumstances. Before I start, obviously, the acknowledgment of country. I'd like to acknowledge the traditional owners of country throughout Australia and recognize their continuing connection to lands, waters and communities. And we pay our respects to Aboriginal and Torres Strait Islander cultures and to elders past, present and future. So starting off with a little bit of a summary, I suppose, of where the LICs stands today. This slide has changed a little bit over the last quarter. I do want to note that you will see from an industry exposure perspective, we have added a few more industries across the funds. You'll see that, I suppose, at the top of the left-hand circle. The market capitalization, we are very true to label. So within that sort of $50 million to $250 million market capitalization range is where we focus most of our attention and investable funds. But we have started to expand into some slightly larger opportunities given the market volatility that occurred over Q3, and I will touch on some of those examples, there's 2 in particular. And finally, most of what we do is in the listed universe. So most of these companies are listed. We do hold 2 unlisted investments within NCC, again, which I'll touch on towards the end of the presentation. For those of you who don't know NAOS, this is a little bit of a summary. I'm not going to go through each doc point there, but we run 3 listed investment companies, 1 private investment fund. We manage funds on behalf of 6,500 shareholders or investors. And finally, directors and staff are some of, if not the largest, investors across all of the LICs. So I don't own 1 share outside of the 3 LICs. And therefore, we ensure maximum alignment to all shareholders. Why we believe we're a little bit different? And this is sort of on one page. I think it really hammers home some of our unique characteristics. Most of these businesses are emerging. Obviously, MOVe Logistics will be presenting today, albeit it's been around for a very long time. MOVe Logistics would argue it's very much an emerging business from a financial standpoint. We do have an unconstrained mandate. We are very long-term investors. So our average holding period is now closing in on 7 years, if you weighted that by the portfolio weighting. We are concentrated in 15 core investments, 8 Board seats, whether it's our representation or through another rep who is not necessarily part of NAOS, and we like to partner with our investments. So we have 9 investments where we own greater than 10% of that respective business. So touching on the performance for Q3. And I think -- I was trying to think of a word best to describe it. There was no doubt it was -- there's some significant divergence. Clearly, I'll touch on the negative, and that was from NSC and the Q3 performance of negative 24. That was driven by obviously the outcome of the BSA tender with NBN, which I'll touch on a few slides in this presentation after the MOVe presentation. That drove all of that negative performance and offset the positive performance of the other investments. NCC, after the strong Q2, it did give some back in Q3, but we are seeing, again, some green shoots as that fund starts to move towards a positive financial year return, thankfully. And NAC, pleasingly, has started to turn the corner, had a very strong Q3, continues to have a very strong April. And I will touch on some of the reasons why and what we have seen across the investment funds through April and some of the catalysts that do remain very much real and may occur within the next few months that could drive significant shareholder value. So the Q3 overview, I suppose, from a macro standpoint, I do feel like this is a little bit rear vision mirror analysis considering how quickly everything is changing on a day-to-day occurrence. But if you look at just Q3, it was a clearly extremely volatile quarter, driven by obviously the tariffs, but also reporting season, which was in obviously February of Q3. The ASX actually fell 4% over that quarter. Generally, when the ASX falls for the first quarter of the calendar year, it generally has -- based on statistics, has quite an underwhelming overall calendar year return. The S&P fell by 6%, was one of the worst quarterly declines in a number of years now. And significantly, that was driven by the Magnificent 7, which fell from 20% from their highs in 2024. So clearly seeing an awful lot of volatility. But I suppose more importantly from my perspective, seeing quite a lot of rotation, and I will touch on this. So where investors are exiting, whether it's the Magnificent 7, whether it's the U.S. dollar. Obviously, a lot of people actually moving into what they consider safe haven equities, being the ASX 20, believe it or not, and I'll touch on CBA shares as an example. Clearly, the RBA cut interest rates for the first time since the occurrence of COVID. Global government borrowing costs, though, continue to rise, and that is, in my view, quite a disturbing, I suppose, event, but something that does need to be actively monitored. And then half year profit results came out for most domestically listed businesses, and I will touch on some of the key quotes that we came across in February and I suppose how we feel businesses are seeing the current trading environment from March into April. And obviously, the Macquarie Conference is next week, which tends to lead to a myriad of profit upgrades and downgrades, where the consensus view is. We're going to see a significant number of downgrades over the next 10 days. Next slide, please. I'm doing the slide, so that's one mistake for me already, a good start. So domestic equity markets. I suppose the major themes of reporting season -- from our perspective, what we would say is probably a bit of a continuation of what we saw towards the end of calendar year '24. So smaller companies continue probably to feel the brunt of poor economic activity levels. And that's what you'd expect. Smaller businesses tend to rely on just a few customers. They don't have the industry diversification. So therefore, they're more susceptible to a slowdown in economic activity. So I suppose that's no surprise. But we would definitely say management teams are more constructive on their respective earnings outlooks. But in saying that, I would say they've learned from their previous mistakes and, therefore, unwilling to give any quantitative guidance. So we saw a lot of businesses who reported their half year results refuse to give solid quantitative guidance for the full year. And frankly, you can't blame them given some of the macro occurrences, the movements in interest rates, consumer confidence. There's a moving feast out there, and based on what we hear month-to-month in regards to trading, it is volatile. Some months are exceptionally strong. You go through April -- obviously, because of Easter April is actually an extremely short month, school holidays, Easter, Anzac Day. A lot of -- I'm sure a lot of companies who come out with profit upgrades or downgrades will talk about April for that specific reason being so short in regards to the number of trading days. Also the wet weather that we've seen in Queensland and Northern New South Wales, I'm sure, will be spoken about. What we also did notice was stock volatility actually has never been higher on earnings reports. So whether a company missed or beat earnings, the subsequent share price reaction was significant, and actually has never been more volatile post a report. And then finally, earnings expectations. For those of you who are unaware, even though the market is now -- surprisingly, the ASX is back above where it was pre all the Trump tariffs, earnings expectations are still negative. So earnings are expected to fall for FY '25, but the outlook for '26 remains positive. So still expecting north of 8% growth. We don't think that is overly unreasonable. I think the key conundrum will be how companies reach that 8% growth, whether it's through revenue growth, continued cost cutting and just generating more efficiencies, I think will be quite interesting. I think this is quite an interesting slide. We did some analysis, and I would ask people, if you are going through this presentation, I would refer to our quarterly investment report. We thought it has some quite good statistics on reporting season, companies that missed and the subsequent share price reactions that we saw across the year or February. So this looks at the negative surprises. And you'll see the negative surprises, there was plenty of them. And I think some of the notable things that I would obviously like to mention here is, if you look at the hit and miss versus key metrics, it might be revenue, it might be profit -- so if you look in the case of Maas Group, they missed profit expectations by roughly 4%, yet the share price fell by close to 15%. So as I mentioned in the previous slide, the subsequent share price reaction was a magnitude larger than what the actual earnings miss was. The other thing that did stand out was just the variety of businesses that did downgrade or miss expectations. So you can see here there's some really well-owned names, some perceived high-quality businesses. Guzman and Gomez would be perceived one of them, Objective Corporation, Reece, which we've hammered on. Reece fell by almost 30% at one stage. Kelsey and the operator of public transport services is another one, Johns Lyng Group. Some of these businesses have been or tend to be quite defensive in nature, but for a variety of reasons, they have really struggled to grow their earnings profile and they've struggled to manage, I suppose, or meet investor expectations. And I think -- more importantly, I think people are a little bit more concerned about the overall long-term outlook, especially for a business such as Reece. That outlook there seems a little bit more hazy for the next 12 to 24 months. These are not generally one-off events. And another example would be Flight Santa. Clearly, they missed in February. They downgraded their earnings again yesterday -- it was yesterday or the day before, and it was quite a significant 20% downgrade. So a lot of these trends that we've seen, they continue to go, they continue to evolve, and businesses have really had to, I suppose, do what they can to mitigate some of these headwinds, but in some cases, it's just too much to mitigate in the short-term. And this -- I suppose we put this slide together because it really focused on some of the key quotes we got for some -- what we think are quite notable CEOs who would have their finger on the pulse in regards to what's going on in the economy and the macro landscape. And I think the point that I really wanted to get across here, and I think a lot of people do miss this is, I would say, if you look at all of these quotes, my view is people have very little idea on what's going on and where the trend will be over the next 6 months, 12 months even. And the biggest issue that faces all investors is just uncertainty. Equity investors hate uncertainty. The more uncertainty there is, the greater the risk premium applied to equities. So therefore, share prices tend to flat line or fall because the risk premium applied to riskier investments such as equities tends to decrease. And I think going through a lot of these quotes, whether it's from Qantas, Judo, Brickworks, the variety of industries, you are seeing some tidbits on what they're seeing from an industry perspective. But from an overall economic perspective, it's actually still very hazy. There are no clear trends. There are some long-term tailwinds, but it's very hard to see some consistent trends month-on-month eventuate in my view. We're not seeing too many of those, if at all. But as I do want to touch on, it's interesting to see -- I made some notes prior to this call, that, if you look at CBA as an example, you would naturally think a business like that will feel some pressure from a slowing economy given bad debts and whatnot, and, technically, lower interest rates are actually quite negative for banks and it could affect their margins. Yet where CBA trades today, it is now back to its record high. It's put on roughly $20 from -- I think it was $142 low. It's back to $163. And I'm sure some people have read the commentary about that. And a lot of the commentary is a lot of large global investors are now flocking back to Australia because they perceive it to be a safe haven. Obviously, we're a net importer of U.S. goods. So in theory, that should protect us relative to some of the other, I suppose, Southeast Asian countries. And therefore, they've perceived to say, "Well, instead of having such large exposures to U.S. investments, the Magnificent 7, maybe where" -- some of the feedback I've had is, "I just prefer to own a CBA share given its liquidity profile, size on the ASX and diversification, and I don't really care what I'm paying for it. I'm just happy to have the exposure." And therefore, again, we've seen CBA push back towards record highs even in the face of some of the macroeconomic uncertainty that we've seen. So clearly, we're in some pretty, I would say, extraordinary times and really dynamic times for equity investors. On the positive side of things, it was pretty benign, unfortunately. So the 2 standouts were Domain Group and Pact Group. Both of those businesses were the subject of takeover approaches. Interestingly, both of those investments anecdotally are very poorly held by fund managers. And to give you an idea, so a lot of the corporate activity is occurring in businesses that probably present value as opposed to popularity and high valuations. And interesting, some of these are definitely more cyclical. So A.P. Eagers, the largest car dealership network in the country; Fletcher Building, the largest building company in New Zealand; Healius, Event Group being hotels and cinemas. So very much value-type business as opposed to momentum, high-growth tech. I don't think there's one technology name in that entire list. And touching on that before I pass over quickly is we have seen a notable rotation. This was at the end of Q3. I think April has probably been a little bit different again. But we did see significant rotation. There was selling of a lot of high-growth businesses as risk premiums increased, and it was vicious. And I think a lot of that was driven by the belief that stagflation has a real possibility of occurring in the U.S. economy, and therefore, equity investments tend to underperform, and just generally high-growth investments will, but don't offer any dividend yield as an example. Clearly, this trend will be dictated by what we all know. That's given obviously economic activity, how tariffs play out, how interest rates move. Obviously, we saw the consumer confidence figures in the U.S. out last night, which were pretty appalling. But again, it's a completely moving feast, and I'm not sure anyone knows how it will look come June, July, August. And to finish off, the 2 last slides that I think are interesting. This just does look at some of the high-growth stock performance we saw in Q3. And just interesting, Zip Money, a business that went from $0.50 to $3 and it's actually come back to $1 now, to highlight the volatility. [Indiscernible] Group, a business that everyone owned given its, I suppose, popularity at the time, the business, I think, again, went from $0.20 to $5. Now it's back to $0.40. There's some significant volatility out there. I did say we've used the opportunity to build some positions, and one position we have built in is in Pro Medicus. So that business we consider to be one of, if not, the highest quality business on the ASX. It has had a stellar run, went up to $300 almost. But in the recent sell-down, it fell to a low of, I think, about $180, and we've used to build a reasonably sized position in a business that we've just never been able to get our head around from a valuation perspective. And subsequently, it has started to retrace back to where it was. So there have been opportunities to acquire some of these businesses. And another one for us was Tuas, TUA, again, a very high-quality business that we've been seeking exposure to for some time, but haven't had the opportunity to. On the flip side, you'd see here some of the names that did outperform were just, I would argue, businesses that no one would have expected to. A.P. Eagers is a natural example. No one would have thought a car dealership operator to outperform in reporting season given some of the headwinds they're facing, but the stock finished up over 30% in Q3 alone. And again, some of these other names, APZ, a property play for affordable housing; Harvey Norman, again, I would say an under-owned and under loved stock. The thematic is real here and some of the rotation is definitely real. And the million-dollar question is, does Q3 make a trend? I would have said probably, but after what we've seen in April, it's definitely interesting. As some of this tariff rhetoric has been toned down, the market is not sure where to place its bet. So it will be interesting to see how it all plays out over Q4. Moving along. We've all got the pleasure to hear from one of our larger investments in the NAOS fund being MOVe Logistics, a business that we've owned now -- I've lost track of time, but it might be 2 or 2.5 years. Happy to put my hand up here and say, clearly, we probably invested a little bit early. But in saying that, over the journey, we've got to know Julia Raue, who is the Independent Chair, and Lachie Johnstone, who's the Independent Director of MOVe Logistics over that journey, who've done, in my view, anyway, a magnificent job of, I suppose, restoring or stabilizing the business, putting in some fantastic people, really restoring the brand and the credibility of the business. And we think post that first half result, really started to show some of the green shoots that a lot of this hard work has led to. So I was really keen, unfortunately, for Julia and Lachie to get them on this webinar just to sort of get the story out a little bit more. And with that, I'd just like to pass it over to Julia and Lachie and let them go through the MOVe journey just for the next 10 minutes or so. And happy to take any questions. If there are any, please use the Q&A chat function. So over to you, Julia and Lachie.

Yes. Thanks, Seb. Look, it's an absolute privilege for us to be here and start to share our story with you. So I joined MOVe mid-'23 and picked up the Chair role from June '24, and Lachie joined the Board in March '24. I thought we'd start by just talking a little bit about our business. We were founded more than 150 years ago, built from the regions, where we still have a very strong presence. We became a listed company in 2017, and our founding shareholders still have quite significant holdings in the company alongside our other 1,800-plus shareholders, one of which NAOS is. And NAOS is a large shareholder for us, and we really enjoy that relationship and that support. One of MOVe's biggest strengths is our size, our scope and our breadth of our company. We transport, warehouse and deliver goods across New Zealand and also offer services such as fuel transport. We do a majority of the fuel transport across the country, specialized lifting and transport and our trans-Tasman shipping service. We offer end-to-end supply chain solutions, including supply chain management. And as I said, our fuel delivery operation is one of the largest in New Zealand. We're also one of New Zealand's largest domestic freight and logistics providers. While our recent financial performance has been below par, MOVe does have inherent value, some of which uniquely sets us apart from our competitors. We have an extensive nationwide network with strength in both metro and regional areas. We offer multimodal end-to-end supply chain solutions. We use rail and coastal shipping to supplement our road freight services. We're very customer-focused with a culture of service excellence, and our customers certainly give us their feedback. Our team are experienced and passionate, and we have a strong brand and a strong position. So look, with that, I'll hand over to Lachie.

Excellent. Thank you, Julia. Thank you for the opportunity. As you can see here on our slide, the total value of the New Zealand freight sector is approximately $32 billion. Road plays a very key role in our freight system. Approximately 93% of all freight moved around in New Zealand is moved by road, and the balance being rail. And we also have the 2 islands, the North and South Island, connected with 2 ferry operators. Albeit we do have some large players, of which we are one, and we have one global player in the form of Mainfreight, we still have a particularly fragmented industry with lots of small operators. You'll see there the major trends driving change. Clearly, climate change is somewhat of an issue that we're all managing effectively, albeit in the political environment, it may have -- some people's views may have changed on that. We will solve some of our climate challenges by being a more efficient and productive business as a matter of course, alongside the adoption of new technologies. Seb touched on the vastly more complex geopolitical environment, so I don't think there's much I can add there other than the fact that, that uncertainty does impact people's behaviors, some for the better, but many for the worse. We -- in New Zealand, we have gone through pretty significant phases of net immigration, and we've been through one of those recently, and that has just stabilized. In terms of our own business, you'll see there with those 4 graphs, we do have a high concentration in terms of our top 20 clients being in the retail sector. Retail demand has been impacted significantly post COVID. We had the benefit of increased demand due to COVID lockdowns that we had here in New Zealand, but also cheap money, and that came to a relatively rapid halt. We are fortunate enough that our government, which has now been in place for about 18 months, is looking to invest back into infrastructure. And so that will benefit us as opposed to measures that have stimulated consumer demand. So we're not expecting high levels of -- we're not expecting large increases in consumer demand over time, although we do get a sense based on recent economic data that we're coming probably very close, if not through the bottom of the trough. And you'll see the significant reduction in residential building consents, which has had a material impact. And once again, we think we're probably coming to the end of that phase. Can I have the next slide, please, Julia? Oh, sorry, Seb. All right. So what have we been doing to respond to our challenges? It would be remiss of us not to acknowledge that the business was in a sales-led phase, whereby it felt that it could grow on the back of population growth, increased consumer confidence, increased demand and also -- and on the back of that increased transport activity. There was pretty significant investment in that, but a number of things happened. One, the economy, for want of a better term, tanked. That impacted us immediately. But it would be fair to say that this business did not respond quickly enough and had made some decisions in terms of where they invested. The team adopted, what we call, an asset-light strategy -- so that's to get plant and machinery off balance sheet -- and to use owner-drivers and also to have high levels of leased plant and equipment. And whilst we might call that asset light, it doesn't necessarily mean that it's cash light, particularly if those assets are not utilized effectively. So amongst all this, the new refreshed Board's priority has been to adjust our strategy, simplify our approach, rightsize and improve performance. We've embedded a number of metrics that matter. I mean we are a B2B business, although we -- ultimately, our volumes are driven by consumer. We are a B2B business. We're a functional business, and we have to perform to a high level in a very competitive market. And so to do that, asset utilization, whether it's our people and their productivity or whether utilizing our plant and machinery, we have to optimize the utilization of those to generate sustainable returns. We are moving very quickly. Julia will talk about it a little more in detail. But in simple terms, our priorities have been restoring the generation of positive cash flows and we've needed to do that by simplifying what we've done. We've refreshed our Board. We have a new CEO now embedded in the organization, and we've filled some senior leadership team gaps, and we're on that journey to meet the market's expectations of where we've said we would be in FY '26. Thanks, Julia.

Thanks, Lachie and Seb. So we've set up an Accelerate transformation program, which Lachie touched on. We launched it in July 2024. The program is framed around 3 pathways, which are in front of you, and we believe these will help us create a stronger, more streamlined business that is future fit. To recalibrate the business, our focus is firmly on reducing costs, rightsizing our business and continuing to deliver excellent customer service while we retain the ability to meet demand when the economy improves. And Lachie has touched a little bit on the economy, as has Seb. Domestic recovery in New Zealand is still slow. We sold off excess fleet to release some cash. We're maximizing efficiencies in our freight offer and making changes to our warehouse network where we had the excess capacity, and it makes sense, and we've rightsized our team. And from a warehouse perspective, Lachie again touched on it briefly, but there is massive oversupply and under demand for warehouse at the moment in New Zealand. Our second priority is to drive profitable revenue growth, and that will primarily come from offering more of our services to existing customers and bringing new customers on board. We've done quite a bit of work in our sales team to increase both their size and their capability and the way that they sell, and we're doing quite a bit of them. The only place pretty much that we're investing in terms of talent right now is in sales. And then we are seen as a credible alternative to other large providers in the market. Lachie touched on Mainfreight. Our team culture, partnership approach and focus on delivering end-to-end solutions is seen as valuable, and that's why we have some marquee scale customers. New services such as our trans Tasman shipping offer are opening up new revenue opportunities, both for shipping and land side. And look, I'd say that we're sort of trialing that. We got rid of an old ship that we had, and we've leased a ship for a year just to make sure that it is a profitable and valuable business for us. And then our third priority is to improve our financial performance. And we are starting to see really encouraging results as our transformation momentum continues. There's more to do. We know that. But in our latest half year results for the 6 months till 31st of December, our earnings and our margins were both improved despite the weak economic conditions. And the majority of benefits from Accelerate will be seen from the second half of '25 and into '26. Next slide, please, Seb. Thank you. So look, we are making good progress. We appointed Paul Millward as Interim CEO in August '24 to lead our transformation program, and he's been a really valuable hire. And as such, we appointed him permanent in February '25. The Board is very pleased to see Paul permanent into the role. It shows the commitment that he has had to the organization and also the ongoing commitment that he has to continue our turnaround. Our priority focus, as I said, has been on cost reduction and gross margin improvement and cash flow generation, driven by sales recovery. We have achieved significant milestones in our transformation plan over the last 6 months as we've done our rightsizing and looked at our assets and significantly reduced our cost base and appointed experienced new leaders to key business roles in freight and warehousing. And again, we're really pleased that despite the very public challenges that we've had, we've still been able to recruit incredible talent. So again, it shows that the green shoots are there, and we have been able to continue the momentum that this business is possible of achieving. As I said, we are investing in our people, especially our managers to improve their commercial knacks and capability, particularly those day-to-day decisions that impact resource allocation and utilization. So when I say we're rightsizing the business, we're doing a top-down, bottom-up approach to that, and we're looking at every single stone and making sure that every single individual is right and in the right place and doing the right job. So those are critical to our success. And we'll just go to the next slide. Thanks, Seb.

All right. What does our outlook look like? Albeit I may have made some pretty frank comments around our past performance, I'm certainly significantly more positive about the outlook because of the progress we've made on the initiatives, particularly the Accelerate initiative that Julia has spoken about. It would be remiss of us to think that the market is going to deliver all of what we need in terms of restoring profitability. There's still -- much of what we need to do comes from within, and we have a very, very strong focus on driving that efficiency. Operational excellence is something that is often bandied about, but in a functional business like ours where margins are relatively low, competition is high, it's extremely important. And so with the new team that we have in place, we have a degree of confidence around their ability to deliver on that. We will see some -- as we discussed earlier, we will see some lift in both consumer demand and also demand in the construction, whether it be residential or commercial in the infrastructure space. And for the second half of '25, we will see those Accelerate benefits come through and into FY '26. Long-term macro drivers remaining positive with the overlay of geopolitical uncertainty, and I don't want to use the word tariff war, but with the jocking for position over tariffs -- I think Seb made a comment a little earlier about no one really knows what's going to go on. So I think we have to panic slowly. And in the meantime, while the rest of the world is working out what it needs to do, we need to have a laser sharp focus on our own business. And if we do that, we will be in a better position than spending our time worrying about what's going on in the world. In terms of our financial goals, as you can see, FY '25, positive adjusted net operating cash flow and a significant improvement in our normalized earnings before tax based on a very poor result in the FY '24 year, and in the FY '26 year, returned to positive normalized EBT. Those measures and goals sound extremely simple and they are extremely simple, and that's what we're focusing on. All right. I think that's us done on the slides.

Yes. I'll just put the slides down. Thanks, Seb. So look, that's a fairly quick high-level overview of what we've been doing in the past year. And while we know we still have work to do and our team know we still have work to do, there are signs of improved business confidence. We highly value the support that you, our shareholders, continue to provide us. Our management team and our Board remain laser-focused on improving this business and creating shareholder value. And as I said, we know we've got more to do and we're just focused on achieving that. So look, I'll pause there, Seb, I think, and see if you've got any questions.

So thank you very much for that. I really do appreciate it. There aren't any questions, so I might just ask you 2, hopefully, easier questions. Hopefully, one that will provide some of the listeners some perspective, and the first one probably a bit more general in nature. I think, as I've mentioned to you both a few times, obviously, what we misread was the New Zealand economy. Given -- we do feel like we're million miles away sometimes.

Yes.

Can you just provide some anecdotal sort of points on what you are seeing post a lot of the interest rate cuts of the new government? Just any sort of tangible -- I hate the word green shoots, but signs of improving sort of sentiment activity?

Yes, absolutely. And the other thing I'd say is that it's been interesting watching New Zealand and Australia because we are in quite different phases. Our inflation was higher than -- this is -- these anecdotes are fairly recent, so mid-April. Inflation was higher than expected, but underlying pressures are fading. As you said, the OCR was cut again, which is great, with timely indicators suggesting the pace of recovery has slowed. So the markets have settled globally, but continue to be unpredictable. So at this point in the treasury update, the markets had settled somewhat, but they are completely unpredictable. What's good for New Zealand is that there are strong dairy and meat prices, and so those are good economic signals for us. But we have, without question, got slower domestic recovery than everyone has continued to predict. So it was going to be last year, then it was going to be the first 6 months. It's slower. I don't think we'll see significant economic recovery until at least October. Card spending data is softer this quarter. But what is positive is house prices have picked up, and as Lachie said, migration has stabled. So there are some good indicators, but there's a lot of unpredictability still, and we're not seeing significant uplift yet. Lachie, you got anything that you'd add on the domestic front?

No. I think interest rates are still quite a significant factor, albeit they've come off the peak. If you compare to where we are in that interest rate cycle relative to the bottom of the cycle where people were borrowing money in the sort of mid- to low 2s, even sitting in the high 4s or low 5s is still a material increase on where they were at, at that low point in the cycle. So -- and given that we did have an increase in indebtedness -- significant increase in indebtedness, both at a government level, but also at a private level, it could take a little while for this to wash through. But as a business, we just got to be better at what we do.

Yes. And yes, maybe just to finish off then and touching on that point before you go. Like the thing that stood out to me and it provides a lot of perspective to me was I think -- like if you look at MOVe's revenue base, it's managed to hold up relatively well, even though like the feedback I had that a lot of clients were trading down maybe 10%, 20%, 30%, even 40%. Yet your revenue base has held up. So it has showed you -- 2 things, I suppose, that stood out to me were you managed to hold your revenue base by bringing on new clients, and then also your gross profit margin has increased reasonably significantly through better pricing. I would argue that's quite a significant achievement in a pretty poor and tough market that would probably be pretty hypercompetitive as well. And I'm sure we'll all find out when Mainfreight results out next week or the week after. Is that a fair comment?

Yes, that was the thinking. But we're trying not to yell from the rafters yet because we're sort of being more humble about it, if you like. Because I think historically and before locking in my time, I think we were pretty good at saying how great we were and how well we were doing. And yes, so we're sort of being more realistic about where we are. But we are definitely fighting to maintain our customers, maintain our revenue and grow our margin. And look, Paul and the management team are doing a fantastic job with that. And that's absolutely why we're also investing in our sales capability. So yes, I think we understand the steps that need to happen. We said we were taking cost out earlier, but we weren't really doing that in a well-managed programmatic way. This is very much a rigor now that we'll maintain in the business. This isn't a one and done. This cost focus, this imagine every dollar as your own mentality and culture that we're developing, this is how we will continue to operate.

Yes. Okay. No, thank you all -- no, thank you again. I appreciate it.

Thank you, too.

Thanks very much.

And yes, best of luck for the last few months of the year.

Thank you. All right. We'll talk to you, Seb. Thank you, Seb.

Again, thank you.

So with that, I'm just going to move on to -- so obviously, normally Rob would do this, my colleague, Rob. Rob is -- luckily for him, he's in the U.S. doing a few site visits, but also on the Berkshire Hathaway AGM, which happens later this week. So I will fill in for Rob and do all of the presentation. And I'll start off with the update on the core investments. And I did say I would touch on BSA. As a big disclaimer, I would also say I went at length to write about the BSA investment in our recent quarterly. So I do suggest people read that as well to provide some perspective. And as I've said to a couple of investors who I've spoken to, I really wanted to touch on the questions or the points that I would be asking someone like myself given the size of the BSA investment and what occurred. So just to update people on BSA. It's a contracting business. Most of its services are associated with telecommunications and utility customers. So they do connecting an NBN customer to the NBN network, so basically from the foot path to the home. And they specialize in dealing with residential, I suppose, connections, whether it's gas, electricity, Internet. So back in 2022, we formed part of a recapitalization effort. So we essentially saved -- not saved, but in essence, saved that business from what could have been a pretty dire time. And the investment thesis at that point was really taking that NBN contract, which they had just renewed -- they've been an NBN client now for over 10 years, maybe 12 years -- and really restoring value. So through that time, we took a large equity position, put someone on the Board, being Brendan York, and really set about on restoring shareholder value for all. To the credit of the management team, but I would also say heavily the Board, BSA, up until about a month ago, was a success story. You can see there on the right-hand side, the EBITDA and the subsequent share price performance. So what BSA was able to do on that journey was they were able to de-gear. They sold a loss-making division, which was their APS division focused on property maintenance, facilities maintenance. They sold that to CBRE, de-geared the balance sheet and really focused on operational performance and excellence, which drove not only profitability, but very good, I would argue, client feedback. And you can see there's a subsequent increase in EBITDA. Obviously, what occurred back in -- I think it was February now, was -- NBN has -- and we knew this all along, obviously, accounts for a very large part of BSA's revenue and profitability. We were aware and it was all public knowledge that the contract had a finite time with options for NBN to extend that if they so wish. What did occur was, obviously, NBN has been under a lot of probably public pressure to get to a level of acceptable profitability given the amount of funds, government funds have been invested in that business, and they went through a lot of managerial change, which culminated in the appointment of a new CEO, who used to run a business called Vocus, which was taken over by private equity a couple of years ago. And obviously, what that led to was the retendering and reduction of contractors, and they put a tender out for a lot of the work that NBN -- that BSA does with NBN earlier than anticipated. Even so, we thought BSA had a very strong chance of securing an amount of work, especially as they did a joint tender with UGL. So for those of you who don't know UGL, UGL is owned by CIMIC Group, one of the largest contracting businesses in Australia, owned by a Spanish company, billions of dollars in revenue. Unfortunately, out of the blue, BSA were told that they would be unsuccessful in their prospects to secure that work. And then subsequently, that work will finish. I think basically what they said publicly now is in -- around July, August, September. Before I move on, a few things I do want to touch on. So some of the questions I do get is obviously, how did this occur? I think I've touched on that. We're all aware of the risk. There's no doubt about that. Clearly, it was more risk than we wanted at the time, but we felt it was manageable given what the Board and management team were doing through a joint tender and also the amount of work NBN has done with BSA over the years. The size of the investment, yes, it was a very large investment. If you go back over the past 3 or 4 years, the size of that investment increased substantially because BSA shares went from a low of $0.30 to over $1 before this NBN tender outcome was announced. Some of you would see that we did sell a large amount of shares about 2 months prior to the result. Frankly, that was the most amount of shares that we could sell at that price given investor demand. We could have probably sold shares potentially at a much lower price, but we didn't think that was the wise thing to do given the risk return trade-offs. In hindsight, clearly, that was not the case. I think, obviously, a lot of people will ask, "Well, what have you learned from the investment? How does this sort of relate to other investments?" BSA is clearly an outlier given the turnaround, given the level of concentration it had with revenue with NBN. None of our other investments are like this. But we knew what we're getting into many years ago, and up until February, BSA had executed, I would argue, much better than expected. But even so, it's not the outcome that we thought would occur, and it's obviously a significant drag on the performance of one of our LICs. In regards to what will happen with BSA going forward, some of you would have seen the quarterly out yesterday. They generated a lot of cash. It was about $10 million in cash for the quarter. But ultimately, now it will really come down to how much cash they can get out of the remaining work with NBN, what is left and I suppose how they move forward. But in the BSA entity itself, we'd argue there's value given the significant amount of franking credits they have on the balance sheet as well as the income tax losses. So there is value there. How that value is unlocked, I'm unsure. But I'm sure it will attract all sorts of proposals and opportunities given what's there, how it plays out. I can't comment and I actually have no idea, but something will, I'm sure, occur over the next 6 months. In regards to some of the other events that occurred, it was a really eventful Q3. And I think the other really big event that occurred was our second largest investment, which was COG Financial Services, one we've obviously been in forever in a day. And thankfully, a positive outcome in this case and one that we've been talking about for a long period of time, probably to no avail for a few years. But what we saw was basically a complete Board renewal with a number of directors resigning or reducing, I suppose, their roles from executive to nonexecutive, and the appointment of 2 directors, being John Dwyer and Tony Robinson. Why that's such a big deal is because John and Tony are former founders of a business called PSC, PSC Insurance Group. PSI was the code. That business was one of Australia's largest insurance broking businesses taken over last year for roughly -- I think it was $2.3 billion. The founders walked away with a significant part of that. I think they owned roughly half the business at the time. They are proven operators in sort of those aggregation type businesses, broking models. They were attracted to the COG business. They see the inherent value in that FB&A network and the novative leasing businesses. But I think it's fair to say they would argue that they also understand the complexities of the business and probably a business that is a lot more complex than it should have ever been. And I think it ties back to some of those comments we made a little while ago about simplifying the business through selling noncore assets, focusing on the core assets, reinvesting into those assets and driving organic growth through items such as pushing more insurance broking down the finance -- broking business, which they are the largest in Australia. So we think this is -- hand on heart, I think it's just the beginning for the COG Financial Services business. What it morphs into we are unsure, but I think it will be a very interesting trajectory now driven and led by people who have a very proven track record and who acquired roughly, I think, 4 million or 5 million shares each recently in the recent sell-down. So watch this space. And I think over the next sort of 6 to 12 months, it will be very interesting to see what sort of strategy Tony and John and the rest of the Board put forward. AMA Group, one of our newer investments in the smash repair space, had some pretty reasonable announcements over the past few months. Obviously, completed their debt refinancing, removed -- again, a business that's simplifying, removed the outstanding convertible notes and signed a strategic services agreement with a large electric bus manufacturer -- you see a lot of them on the road, that opens up a new revenue opportunity for them -- and showed some pretty strong results for their first half, albeit one part of their business continues to underperform. More recently, they've appointed a new CEO, one which was from the AMA Group of sort of yesteryear, but one we would argue has a very loyal following and a very deep understanding of the business. They also announced a renewed agreement with Suncorp in regards to pricing, volumes, and seeing Suncorp support their business through more greenfield organic growth opportunities. So we think it's really setting itself up, AMA, to start that organic growth journey again and really bank on some of the opportunities they should be able to secure through having the advantage of scale. This is a business that's close to $1 billion in revenue to give you an idea of just how large it is. Saunders International, one of our largest investments in NCC. So after 5 years of record revenue and EPS growth, the first half result was strong, but margins were lower. The thing that I think we've seen in Saunders share price fall from $1.05 to $0.83 was the guidance for the full year. So they're expecting quite a soft second half. And this is due to just delays in the awards of contracts. They're not alone. We saw [ Simvec ] do the same thing. Duratec have said similar things. There are a lot of contracts out there that are yet to be awarded, especially in defense, and a lot of that's driven by uncertainty, macro uncertainty, federal elections, budget constraints, the usual things. But in saying that, the tendering activity has never been higher. The type of clients Saunders is looking to work with is significant. These are large businesses on very large projects. Clearly, the commentary around defense and where Australia needs to invest is real. But what we need to see if we need to see the rubber hit the road, and as I said in the quarterly, that we would really be looking at Saunders to announce some of these contract wins over the next 3 to 4 months. And interestingly, it was interesting to see that Ahrens Group, a very large privately owned construction and engineering business, continues to increase their shareholding in Saunders, which is now closing in on 8%. Another new investment here, Tuas. For those of you who know Tuas, we owned a lot of Tuas shares early on in the day and, unfortunately, sold them way too early. But we used the recent share price pullback to increase our position. Obviously, Tuas is a large mobile operator in Singapore, run by the former founder of TPG Telecom. They released their first half results, which again showed strong growth across all metrics. They continue to launch into new adjacencies such as business plans, a broadband product was launched. So it will be very interesting to see how they continue to grow. Even though the law of large numbers in theory should see those percentages slow down, we think this business is on a very strong trajectory. And given their cost to serve is so low, it gives them a significant cost advantage relative to their peers in a market that's dominated by old monolithic and, we would say, very high-cost operators. Tuas should continue to grow, and it's an extremely high-quality business run by a high-quality management team. To finish off, Hancock & Gore and MOVe Logistics. Hancock & Gore, they acquired a small LIC that they ran, which they managed, they're also a large investor in. From our perspective, this just simplifies Hancock & Gore. It's quite a bit of a thematic here with all these businesses simplified. But it also strengthens their balance sheet. It gives them the funds required to pay out any outstanding liabilities on the recent acquisition of Schoolblazer Group, and it also increases the size of the head company and the liquidity of the free float. They had their AGM presentations, which talked about consolidating their accounts, and their Executive Chairman continues to purchase shares on market. They just released a trading update post Q3. It was actually quite a strong trading update. So from memory, Schoolblazer grew revenue on like-for-like, assuming a flat currency, of 14%. There aren't too many retail operators, I would argue, growing revenue at that sort of rate in this market. So we think come their result, if they can provide some simplicity and clarity on their results given the structure, and if they can start to sign some significant Australian schools, we would see this stock get a significant re-rate given it's paying a $0.01 dividend for the half on a share price of $0.26. So $0.02 on $0.26 is a pretty healthy yield for a high-growth business. And then finally -- I won't touch on MOVe for too long given the presentation we just had, but a firm believer that this business is really now starting to make some big leaps forward. We feel like they found a really good groove. They've got an excellent management team in place. Staff -- I suppose turnover has definitely settled down. They're winning some good customers like the Warehouse Group and a number of brewers as well in North Island, and we are seeing some really good business disciplines come in. So we noticed some price increases come in at the start of the year. Some have come in again. Generally, when we see some of our better investments, these are the things that we see, a good disciplined strategic initiatives that drives both margin and revenue improvement, which ultimately leads to better profitability and strong shareholder returns. So clearly, they've made those comments around guidance. We personally think the first half result sets the second half up for a much improved result. How much better it will be, clearly, we are unsure, but we think the momentum is very strong for MOVe. And considering you've got a business that has $300 million of revenue and a market cap of $30 million, as I said in the quarterly, I think the market is giving MOVe next to no chance of generating much, if any, profit at all going forward, which we don't believe is the right thesis. So just looking out as best as I can -- and as I said, these slides generally don't prove to be overly correct -- I would say taking -- moving BSA to one side, I think the thing that I've definitely seen is some of our core businesses are really starting to move in the right direction for once. A classic example is COG, $0.90 January, I think, post the result, today, $1.40, based on just an overhauled Board. They haven't released any fantastic financials or done any significant strategic initiatives. And therefore, we think the potential for some of our remaining investments is similar, if not more. We think a lot of our investments are catalyst rich. As you would have seen with some of our funds, they are geared. So any significant move in the investment portfolio performance will be magnified into the NTA investment. So if NAC's geared at 35%, it's up 10%, the NTA will be up close to 14% to give people an idea. So clearly, the gearing has worked to the downside, but we firmly believe it will work to the positive side as well. And we also believe that the market, given the rotation, has started to change. We are seeing more love for value type investments, more love for small cap investments that can generate a sustainable return. And I think people are thinking twice about where they want to allocate their capital. Do they want to be hell bent on owning Tesla shares for the next 10 years? Or are they taking a bit more of a diversified approach given some of the macro events that have occurred, some of the tailwinds and government policy changes that we've seen? And we have taken this opportunity -- obviously, we sold some COG shares recently. We have taken the opportunity to build out several newer investments, whether it's AMA, Pro Medicus. Bravura is another one that we've recently acquired a reasonable position in as well. So we are looking to diversify the portfolio into businesses that we've followed for some time and take advantage of those share price corrections. And I think this for me is probably the most important slide across the whole pack of 31. A lot of our investments and our large investments do have a number of catalysts that could occur over the next 3, 4, 5 months. Clearly, I've put in one red that has occurred and didn't go, it was unsuccessful. And yes, I appreciate it was a disaster from a performance perspective. But when looking at the NSE performance, the rest of the investments are performing. And I do firmly believe that we can claw back a significant amount of that underperformance in a short period of time. Clearly, COG was one of those catalysts, but there are some really notable catalysts in there. And I think some of the ones that I would be looking for is the MaxiPARTS result at the full year and just to show that, that business can generate great cash and profit growth as they did in the first half, but I think people need to see it in a full year. If COG can sell some of those noncore assets, that will drive a re-rate. UBN, we've been talking about the successful strategic partnership with a large Australian financial institution for a long time now. So if they can pull that off, as they said they would do this financial year in the quarterly today, that would be a significant catalyst for that stock. And then finally, MOVe Logistics. If they can move to profitability, there's no reason why that business can't go from a valuation of $30 million to $60 million or even more given the revenue base and the clientele that they have. So I don't believe COG's is a one-off. I think COG is just an example of what can occur across a wide range of our investments, and therefore, the significant potential for upside is real in my view. But clearly, I'm very aligned with all shareholders, and I'm sure some people would argue I'm too close to the investments anyway. But we are very focused on driving shareholder value and restoring shareholder value in many cases. And then finally, the dividend charts. I won't touch on those, but I'm always happy to take questions. I do get a lot of e-mails on dividends, et cetera, and franking. And as I said at the full year result road show, the ability for us to maintain dividends and franking comes down to performance. So we need to sort of perform at sort of 10% or more to maintain these levels, and the franking will simply come down to our ability to pay tax and receive franked income. So I think -- as I've always said, the franking part is much harder than maintaining the dividend, but we are laser focused on performance. If we can knock over the performance, then the rest will fall into place. So with that, if there are any questions.

I do have 2 questions, so I'll answer those. And if you do have more, don't hesitate to pop them in the Q&A section of the screen, so, hopefully, I'm seeing all of them. This is just a question from [ Zane ]. I know [ Zane's ] e-mail before, and I do -- I can understand his question. So the question actually relates to NCC. So obviously, NCC is the only one of our LICs that's not doing a buyback. Obviously, NCC trading at a discount to its NTA. So clearly, in theory, it would be a no-brainer to do a buyback even if it was potentially at the case of dividends or instead of dividends. So no, a good question, [ Zane ]. It's something we think about all the time. So as I have said a few times, so obviously, NCC is a geared fund. It is probably our highest geared fund by some margin. So we are cognizant of using any investments or cash reserves given the market volatility because we don't want to be too highly geared. In regards to will we reduce the dividend and use those funds to initiate a buyback, a good question. I think the thing we always struggle with is we've got to manage everyone's investor expectations. We've built a brand here over the past sort of 14 years, and there is an expectation that we'll maintain a level of dividends that's similar to what we have done so before. And I'm very -- I think all the Board members are very focused on that. We don't want to chop and change too much. But I would say this, you've probably noticed that NAC and NSC have restarted their buybacks. That's probably on the back of some improving performance. And therefore, that takes the pressure off liquidity, any gearing issues, and therefore, we can use those funds to acquire shares at reasonable discounts to NTA. So if that occurred with NCC, then we would look to do a similar thing in the near future, but it really comes down to performance. And then one thing I would say about NCC that's different to the other 2 is it does have those 2 unlisted investments, so MitchCap and Ordermentum. We haven't revalued those investments for a little while now. I would say they are making very good progress on their respective strategies. So the potential for us to value them or revalue them within the next 6 months is probably real. And depending on how that -- they're reasonable investments within the fund. So if they went the right way, then that would provide a reasonable boost to the NCC NTA and give us some ammunition to start those buybacks. In regards to -- Trent Howard said, which funds acquired Pro Medicus and Bravura? So both -- given the size of those investments, they're both in NAC. [ Hamish ] -- sorry. So some commentary on how you may look to refinance the NCC GA and the NAC GA listed convertible notes. A good question, [ Hamish ]. So given my recent experience with the NSC note, given it was quite a different structure -- I think from our perspective, there's still a fair amount of time to run. I think given my experience, it would be a mixture of using some cash generated from the performance we've seen out of those funds and then probably refing back into a similar instrument that we have with NCC GAs and NAC GAs. Given the feedback we've had from those holders is -- people actually like those instruments relative to just owning a LIC. So people who own the LIC, they also actually like to own the notes given the fixed interest nature and the optionality they have. So I think that's what we would look to do in the future. Trent Howard, a good question. So I haven't spoken about it. So well done, Trent, for asking about it. So Big River is one of our largest holdings. Are you seeing any near-term catalysts? So yes, probably well done, Trent. You'll notice I haven't -- I don't think I've mentioned it once in the presentation. But yes, Big River is one of, if not our largest, investment. And it's fair to say it's probably at the whim of building activity across this country. And if I see another article that says we've got a housing shortage, yet we can't seem to build any houses, I might scream. So what I would say, some of the feedback we've seen is new homebuilders are definitely seeing more inquiry levels. So I think if I step back, what Big River needs to drive a re-rating or a catalyst, as you said, is it just needs to see the revenue increase. It's got a fixed cost base, and all it needs, frankly, is just more revenue or the GP margin to increase. As I had a comment from someone there the other day, it's like the business has $400 million in revenue roughly. It could do another $600 million of revenue with the same cost base to give you an idea. For that to occur, we need more building activity, specifically in residential activity, which 60% accounts for Big River's revenue. We are seeing -- some of the new homebuilders we speak to are seeing definitely higher inquiry levels. They are being more proactive on marketing, given a lot of their sort of order books rolled off. But what we are seeing is it's still a tough market. It's just a slow market finding trades. Now we've had the issue with the weather, sort of 1 step forward, 2 steps back. But I would say Big River are making a number of strategic initiatives -- internal initiatives that do make this a much better business than what it was even 2 or 3 years ago. So they're selling a lot more value-add products as opposed to just reselling other people's products. So they sell a lot more panels. They're pushing into new geographies. And to give you an idea, their top 20 actually hasn't changed in the past 3 years. So they're not losing customers. It's just a market issue. But they are actually -- they are able to hold their own. So it will be interesting to see the result that they come out with, but I think you won't find a better play to a building recovery in this country than Big River in my view, and you're not paying a lot for it. And I think people underestimate the leverage in that business. A good question from Daniel. Do you think the significant risks associated with obviously the levels of liquidity concentration and leverage in all 3 LIC is appropriate? Yes, a good question. I think, obviously, given what occurred in NSC, and we're well aware of the concentration risk -- we're definitely willing to have concentration in the right investments. So I think Big River is an example of that, in my view, anyway. And COG, obviously, that worked out. But we are also very cognizant of having concentration in some slightly more liquid investments. And I think that's why you've seen some of those newer investments come in that are a bit more liquid, so your Pro Medicus and BVSs. So BVS a classic example, quite a big business, but the thing that really attracts us to us, it is now founder-led again, driven by some Canadian investors that own almost 20% of that issued capital. So right up our alley, but a bit better on the liquidity profile. And I think that's where you'll see us move to, to give us some more balance, but we're definitely not going to shy away from our roots. I just think you'll see a more balance. Instead of having 8 investors, you'll see us move back to 15, which provides liquidity. Still concentrated, but not as concentrated, and it can also balance off net of the leverage that we've got across the LICs. A good question from Steve Armstrong, which I don't think I can answer, but I will get an answer to you. So it says, when will the NAC GA quarterly report be released? If I ask Raj, he might be able to tell me. Or it has been released? I think it's already been released. So if you go to our website, it should be on it. I'm looking at Raj, so hence why I'm not looking at the screen. So if you go to our website, it will be on our website. Steve, if you can't find it, just e-mail me and I'll send it to you. As you said, it's been running fairly close to the trigger point. I would say, though, if you look at the recent performance of NAC last month as well as this month, it is well under that number that you referred to and hopefully continues to fall well under that number, thankfully. So long may that continue given the performance. So that's all the questions I've got. I do get a lot via e-mail. I replied to about 23 by e-mail. So if you do have any other questions, don't hesitate to just e-mail me, and I'll try to get back to you the same day if I don't run out of time. But as always, if you do have any suggestions, comments, thoughts, concerns, don't hesitate to get in contact with anyone at the team. I appreciate a lot has gone on in Q3. There's no doubt about it. But it's good, bad and the ugly across all 3 LICs. But from my perspective, really pleasing to see some of the core investments finally starting to show some signs from a performance perspective after what's been, without a doubt, the hardest 2 years of -- 2 or 3 years of my career. So hopefully, that may continue, and we can provide you with another reasonable update for Q4. So thanks again and look forward to speaking with you all in a couple of months.