SGH Limited (SGH) Earnings Call Transcript & Summary

Good morning. I'm Kerry Stokes, Executive Chairman, Seven Group Holdings. Welcome to the Annual General Meeting of Seven Group Holdings. There is a quorum of shareholders present in the room and joining us virtually. I'm pleased to declare this hybrid meeting open. First, let me introduce the members of our Board. In the room, we are joined by our Managing Director and CEO of Seven Group Holdings, Ryan Stokes, Annabelle Chaplain, Chris Mackay, David McEvoy, Warwick Smith, Richard Uechtritz. Kate Farrar is attending this meeting remotely from another state. SGH has undergone a process of Board renewal over the past couple of years, allowing us to create a Board of outstanding individuals who have worked constructively together to help guide the strategy and consequential growth of SGH. As part of this evolution, this will be my last AGM as Chairman of SGH. And following this meeting, Terry Davis will take up the honor of leading this exceedingly capable Board and an equally capable management team. This will also afford the Board the opportunity to review its composition to ensure it remains appropriate for SGH and will give us the opportunity to introduce the next wave of talented directors. It is appropriate that I acknowledge all of the directors contribution and personally thank each of them on behalf of all shareholders for their ongoing commitment. We are joined by our Chief Financial Officer, Richard Richards; our company's secretary, Warren Coatsworth. Representatives from the orders of the company's financial statements, the year ended 30th of June '21, Deloitte, are also present at today's meeting. I'd also note this is [ Joan Gordon's ] final year of signing partner with [ Harriet Fortescue ] taking over this role in FY '22. Seven Group Holdings results in the 2021 financial year demonstrate the value of our quality businesses and the capable management team, supported by an exceptional workforce and excellent business partners. Ryan will shortly talk in detail about the results, but as this is my last meeting as Chairman and Director, I wanted to reflect on the evolution of SGH and what has made us such a strong company today. In 1988, I acquired Wigmores, which is now WesTrac, with its main asset being a partnership with Caterpillar in the U.S. Under the early leaderships of Frank Johnson and Jim Walker, we've built what is now one of the leading Caterpillar dealerships in the world. The then Chairman of Caterpillar, Don Fites, considered the start-up of WesTrac so important, he charted 2 747 planes to fly in the first parts supply to ensure our customers were fully supported. During this time, Ryan and my other son, Bryant, spent their school holidays stacking parts at WesTrac to help us get underway. Later, Bryant worked at WesTrac and Ryan attended Caterpillar's Executive University. Over time, we widened our geographic spread through second and third dealerships in New South Wales and ACT and we're granted 1 of the 5 dealerships in China, being Beijing and the 5 provinces in the north and east of China. We spent 20 years building the China Caterpillar distribution business, employing many thousands of Chinese and with training programs to qualify them in a range of trades and as engineers to support the sales and service that was required through our territories. Building on this successful relationship with Caterpillar, we acquired a majority stake in National Hire Group in 2008. In partnership with private equity group Carlyle, we then took over Coates business and merged with National Hire to consolidate the 2 largest hire companies in Australia. In 1995, we took out of Seven Network and later combined with The West Australian newspaper to what would become a very successful media group, Seven West Media. Through a period of Seven ownership, I enjoyed working with the late Maureen Plavsic, and I'm proud to have appointed her as the first female CEO in Australian television. Both Maureen and indeed the late David Leckie, made incredible contributions to Seven. It was David Leckie who led to network to the leading television business in the country. And I acknowledge the contribution of Bruce McWilliam, who served on the Seven Network and SGH Board and was critical in supporting David Leckie. Like all traditional media companies, Seven experienced challenging times. But has now emerged as a strong digital platform combined with traditional television and newspapers. Under the leadership of James Warburton, Seven has seen a resurgence in performance across both television and newspapers with increased audience share. Seven West Media this year demonstrated its strong digital future with the coverage of the Tokyo Olympics. Simulcast across 40 channels, Seven's coverage of the Olympics was applauded worldwide. With 7plus registering users jumping to more than 9 million. Seven West Media has recently announced the acquisition of Prime Television. This transaction will open up the way for Seven to sell complete national packages to advertisers wishing to reach city and regional areas with 1 buy. In 2008, the formation of Seven West Media created an opportunity to form SGH, combining WesTrac and Coates under the leadership of Peter Gammell, creating the foundations of what is now SGH. It would be remiss of me not to highlight the contributions of Rebecca Maslen-Stannage and the late Fiona Gardiner-Hill, who were critical in working with Peter to bring the vision of SGH to fruition. There were a range of complex capital market transactions to bring about the formation of SGH out of the direction of Chris Mackay, Terry Davis and Richard Uechtritz. This allowed us to access new capital to support the growth of the group. On listing in 2010, SGH was a $2 billion market cap company. 50% of that value was made up of our various media interests, including a majority stake in Seven West Media. Under the leadership with Don Voelte, we found the next opportunity for growth in the LNG market through the acquisition of Nexus. We now take the Crux major gas field through to FID. It's an exciting time where our partners, Shell and Tokyo Gas, look forward to have LNG cargoes in the market, which will be a material short of product. Meanwhile, the expected tightening of the East Coast domestic gas market led us to acquire strategic shareholdings in both Beach Energy and Drillsearch. Dislocations in price have recently given us the opportunity to acquire more shares in Beach and SGH now owning a 30% stake. This shareholding provides us with an exposure to both East Coast gas market as well as export LNG from the Waitsia field in the Perth Basin, where the infrastructure for distribution to process already exists. Ryan took over the leadership of SGH in 2015. He's built a very strong management team who support and deliver his vision. I acknowledge a very strong support provided by CFO, Richard Richards. Together, Richard and Ryan form a very formidable team. He has led the successful divestment of WesTrac China, which allowed us to acquire the remaining 50% interest in Coates from Carlyle. The WesTrac team now led by Jarvas Croome, and the recently retired Greg Graham, has continued to build 2 of the highest performing Caterpillar dealerships globally, with 85% of the world's fully autonomous trucks working in our territory. The only autonomous truck training in the southern hemisphere is operated in Collie, South of Perth. The demand for this new technology has seen the training center booked out for the next 6 months. There is a challenge and excitement for the future as decarbonization of mining drives a next wave of opportunity for WesTrac. The most recent phase of growth for WesTrac has been delivered by Ryan and his management team and taking control of Boral. The team raised the capital of $6.2 billion of debt to support the takeover of Boral. They have a clear plan to realize value from its underperforming businesses and property. All the transactions I've listed from Wigmores to Boral have allowed your company to both grow and diversify with exposures to media, mining production, construction, infrastructure, investment and energy transition. Through our strategic capital management, focus on operating discipline and a capacity to accept and navigate risk, the group is well placed for the next phase of growth to the benefit of all shareholders. This will be achieved through the group's strong leadership team, engaged employees, operational excellence, supportive business partners and satisfied customers. The group's business holds leading market positions supported by strong balance sheet and financial discipline, enable us to complete and take advantage of growth opportunities. On behalf of the Board, I thank our staff and you, our shareholders, for your continuing support and commitment to our company. Together, we now employ over 14,000 employees. We continue to adapt the ever-changing market and ensure our businesses remain strong and competitive. I wish to thank all the former directors of SGH for their support of the company evolution over the past 13 years. I wish to acknowledge and thank our existing directors, Annabelle Chaplain, Terry Davis, Kate Farrar, Chris MacKay, David McEvoy, the Hon. Warwick Smith and Richard Uechtritz. I look back on what has accomplished with great pride and look forward to assisting the group in an advisory capacity. I'd like to take this opportunity to thank my wife, Christine. She's been by my side through every step of the evolution of the group and has supported me and indulged my passion for this business. I want to acknowledge my son Bryant, who through his career has worked with Seven, WesTrac and Coates, and is now working closely with me at ACE. I look forward to watching Terry Davis and Ryan continue to achieve the next exciting stage of growth for the group. And on that note, I'll ask and invite Ryan to address you.

Thank you, Chairman. On behalf of the company and all its employees, I thank you for the leadership and guidance that you have provided throughout the successful SGH journey. Although I know you're not going far, you remain as personally invested in SGH's ongoing success going forward. Let me now extend my welcome to our shareholders to the Seven Group Holdings 2021 Annual General Meeting. It is pleasing to be back in our traditional in-person AGM format after what has been another year of challenges, but also one of opportunities. Firstly, we start with safety. With more than 14,000 employees across the consolidated group, safety and well-being of our people is our top priority. While we are pleased with the safety improvements that were achieved during FY '21, reducing group LTIFR and TRIFR there is more we need to do. We would like to say that the 5-year track record of continually improving is continuing. However, the safety results in Q1 FY '22 highlight this journey requires a constant focus. Our leaders throughout all our businesses are continually focused on initiatives, training and behaviors to improve the level of safety performance and keep our people safe. We established the vaccination recognition program, acknowledging the importance of vaccination for employees, customers and the broader community. We continue to invest in our people through apprenticeships, trade upgrades and ongoing training initiatives, which is critical to ensuring ongoing access to skilled labor. Diversity is a key objective, and WesTrac and Coates are targeting increased female participation in trades and management, targeting 25% female representatives in our workforce by 2025. Earlier this year, we outlined our commitment to achieve net 0 emissions by 2040 in WesTrac and Coates. I'm pleased to announce the interim targets for the business of a 30% reduction from 2020 levels by 2026 and a 50% reduction by 2030. In September, we released our inaugural sustainability report outlining SGH's approach and actions relating to environmental, social and governance issues. SGH's businesses have a strong track record of supporting their communities over long operating histories. We are engaging constructively within our communities, with SGH contributing $4.9 million last year through our Bushfire Assistance Program, and we are continuing to support indigenous communities through programs and partnerships to provide opportunities for employment and business development. I encourage all shareholders to read the sustainability report available on our website. In the report, we outlined SGH's approach to the 10 most critical issues identified across the group. While specific actions and target on each issue would differ for each of our businesses, a common aspiration shared for each across the group. FY '21 was another strong year for SGH driven by our operating businesses WesTrac and Coates and the contribution of our equity accounted investments, particularly the inclusion of Boral and the successful transformation of Seven West Media. The Boral investment has since increased to 70% and now forms part of the consolidated group. Collectively, our Industrial Services businesses are well positioned to benefit from the robust outlook for mining production, construction and infrastructure activity. Our investments in energy and media are also well positioned through the recovery in both sectors and opportunities emerging. Group underlying EBIT increased 7% to $792 million, driven by a 13% growth in EBIT from our Industrials businesses. Group statutory EBIT rose 143%, reflecting a $93 million impairment reversal in respect of our investment in Seven West Media. Earnings growth translated into strong operating cash flow generation, up 16% to $622 million, and EBITDA cash conversion strengthened to 84%. The level of earnings and cash flow performance across the group is supporting investments into future growth, while also providing the confidence to increase the final dividend by 10% to $0.23, taking the total dividend to $0.46. This increase in dividend when considered with our dividend approach of stable and growing dividends over time should provide some perspective as to the confidence in the outlook for SGH. Within our strategic framework, our purpose is to recognize and serve exceptional businesses. This purpose is supported with our values of respect, owner's mindset, courage and agility. The disciplined approach of SGH to identify opportunities and supporting our businesses in delivering the best performance is our purpose in action. The past 12 months presented several opportunities that we look to capture in a disciplined way to drive value for our shareholders. Starting with our capital structure. We strengthened our balance sheet through new borrowing facilities along with the upsize and extension of our corporate debt facility in December last year. We then added further capacity through the capital raising in April. We're encouraged by the strong shareholder support via the share purchase plan. These steps not only allowed us to increase our investment in Beach to 30%, but gave us the flexibility to pursue the Boral offer, which has now delivered an exciting opportunity to create significant value. We understand how to drive industrial businesses. We take a long-term view founded on operational excellence, disciplined execution and exceptional people. In that regard, our focus now is to support Boral management to deliver the transformation program and improve business performance and returns. Debt reduction is a key objective, and our target is to repay the $2.97 billion Bridge facility before June 30, '22. We expect a significant distribution from our share of up to $3 billion of capital return approved by Boral shareholders, subject to ATO approval. Our investments will continue to evolve. And so far, in FY '22, we have divested, what? $120 million of our listed portfolio. We have appointed advisers to explore a sale of Crux as we approach FID. We're actively looking at adjacent opportunities for WesTrac and Coates. The funding initiatives across the group over the past 12 to 18 months have been made possible through the strong confidence we enjoy from our lending group and the debt and equity capital markets more broadly. This is best evidenced by the increased commitments from new and existing lenders in FY '21. And the $6.2 billion acquisition facility we put in place to support the Boral offer. We have a diverse borrowing structure continually being optimized, including the use of low-cost equity swaps. We are comfortable with the leverage currently within the consolidated group and our ability to manage this through deleveraging options and the strong operating cash flow of our operating businesses. We have taken Coates to the USPP market, noting that we repaid $1.1 billion in Coates debt from the SGH facilities in FY '18 after we moved to 100% ownership. We'll close the transaction shortly with funding of $900 million to be provided in January. In addition, we've already repaid $556 million of expiring USPP and OEM debt thus far in FY '22. Given the long-dated nature of this debt when compared to the current borrowing rates and interest savings are significant and offset approximately 2/3 of the interest cost on the bridge facility. Through this capital structure, we are increasingly fixing our interest rates. On a pro forma basis, the consolidated $3.1 billion of net debt for the combined SGH and Boral Group as at 30, June 2021 is expected to settle between $4.6 billion and $4.7 billion, assuming financial close of all announced asset sales and completion of proposed capital distributions. When engaging with our investors, we encourage them to look at the group a little differently. When -- with equity interest, excluding Boral of $1.3 billion, the group net leverage against our operating businesses remains very reasonable and hence, our ability to use leverage to acquire the position in Boral. The SGH portfolio includes exceptional businesses across Industrials, Energy and Media. WesTrac is one of the world's leading Caterpillar dealers supporting customers across mining and construction. Coates is the largest equipment rental services company in Australia and an important provider of end-to-end solutions in temporary works engineering and industrial shuts. Boral has a national network of construction materials assets with significant potential for value creation. Our energy investments comprise 30% of Beach Energy and 100% of SGH Energy. Together, they are positioned to create value through supplying gas into domestic markets and exporting LNG. And Seven West Media is one of Australia's leading diversified media platforms that has successfully transformed with earnings growth and improved balance sheet. Rather than present our businesses, we thought it would be more interesting to talk to the investment thematics and drivers for our businesses. As a conglomerate, we are constantly evaluating the portfolio and how we want to position SGH for relevant themes and underlying drivers. We are strongly orientated across 4 key themes of mining production, construction and infrastructure and energy demand and the consumer with media. When we talk mining production, we're talking about production volumes. This is best characterized by export volumes. Over the past decade, Australian mining sector has continued to grow overall export volumes. Global economic activity levels have continued to create demand through some significant economic disruptions. Iron ore demand is expected to continue at a high level for a foreseeable future with a geographic shift in mix from highly populated Southeast Asian countries with growing steel intensity. With some of the lowest C1 production costs in the world, Australian miners are well placed to capture this demand. Low cost production also provides the financial capacity to withstand price volatility. Coal exports are continuing near record levels, notwithstanding recent disruptions relating to China. Volumes have been absorbed by other parts of Asia and the current level of demand is reflected by Newcastle coal currently sitting at 15-year highs. In addition to iron ore and coal, there are emerging opportunities being created through gold, copper, nickel, lithium and future-facing rare earth metals. WesTrac generates close to 70% of its revenue through mining customers with a large proportion of that comprising iron ore. WesTrac key driver is the level of mining production through the volume of earth moved, the day and night operation of equipment, the level of wear and tear and the resulting level of maintenance required through parts and service and ultimately, the need to replace fleet. Coates is also a beneficiary through its mining and resource customers who need plant and equipment to complete mine expansions and undertake facility shutdowns. We are seeing a high level of project deliveries of major customers supplemented by additional committed projects in the pipeline. Customers are continually pushing production by extending the life of their fleet, creating a high level of demand for support activity. Customers are also focused on optimizing that fleet over the long term. We've seen the first wave of technological step change through autonomous haulage, which is ongoing and expanding from trucks to other ancillary equipment. The next stage is emissions with BHP and Rio recently partnered with Caterpillar on the development of zero-emission mining equipment. WesTrac is continuing to support customers in their drive to maximize production. We are invested in facility expansion to meet level of demand and we're investing in our people to meet labor shortage, and we're building technological leadership in order to continue delivering value to our customers. The infrastructure pipeline remains strong and continues to build through government investment to provide stimulus and in response to current economic conditions and drive national productivity over the long term. $1.1 trillion of spending on engineering and infrastructure is expected over the next 5 years, of which public infrastructure is $218 billion across hundreds of road, rail, utilities and social infrastructure projects. The level of infrastructure investment is expected to double over the next 3 years and combined with the expected growth in residential construction and eventually a recovery in nonresidential construction, this will drive significantly greater demand for equipment and materials. Over the next 3 years, demand for equipment is expected to grow by 140% and demand for materials is expected to grow by 120%. Within materials, the strongest growth is projected in quarry products, particularly rock and bluestone, expecting a 240% growth. Infrastructure and related engineering represent a sizable proportion of the end markets of Boral and Coates. WesTrac also supplies services to construction equipment. With the strength of infrastructure pipeline, the opportunities for our businesses are vast. Together, Boral, Coates and WesTrac provide exposure across the life cycle of major projects with minimal contract and labor risk. To capture these opportunities, Coates is growing its penetration with Tier 1 customers while also progressing new channels with mid-tier and trade customers. Specialist offerings aimed at enhancing customer value through engineering services and engineering solutions are also expanding. From a Boral perspective, investment is underway to optimize its network to meet the anticipated level of activity. Importantly for Boral, the opportunity for infrastructure is coupled with strong demand from construction customers. Energy markets are currently reflecting a strong level of demand translating to Brent above $80 a barrel and spot LNG remaining above $30 per MMBtu. This reflects a recovery in global economic activity as we move through the COVID pandemic. The LNG outlook is positive over the medium term to long term, with more supply needed to meet projected level of demand. Domestically, gas supply remains tight with the latest AEMO forecast to identifying a gas supply constraint in the East and Southeast markets by 2023. These trends are set to benefit the group with Beach progressing its Waitsia development with Mitsui and having now signed a first LNG contract for 2023 offtake. SGH Energy's investment in Crux has completed FEED and is evaluating proposals for detailed engineering and execution phase, followed by FID. We have appointed advisers to examine a potential sale of the asset. Projects such as Beach's Otway development and SGH Energy's Longtom projects will be critical to expand the level of supply to the East Coast gas market. Beach is also well positioned to supply into the West Coast domestic market. In media, advertising has rebounded strongly through 2021. Free-to-air advertising spend has grown by 32% over the 12 months to September. BVOD continues to grow with viewing time increasing by 40% in September and October. Ad spend was up 66% year-on-year during the 6 months to June 2021. Seven West continues to evolve its digital platform and offering to take advantage of available opportunities. This year, Seven West is forecasting EBITDA of $120 million from digital, which will be up 100% last year. Consolidation within the sector is an opportunity and Seven West will deliver significant value for the acquisition of Prime. As you look at performance for the year-to-date, WesTrac is continuing to benefit from strong mining and construction demand. We have seen some supply chain pressures, including port disruptions, shipping delays and CAT machine and parts supply constraints. We are working closely with CAT as they look to manage the impact. Coates has delivered Q1 results in line with budget, notwithstanding the impact of lockdowns. And we are seeing strength in Queensland and WA, while New South Wales and Victoria are showing signs of recovery. Pleasingly, the level of activity and demand driven by the acceleration of projects has resulted in an increase in time utilization approaching 60%. Boral's Q1 results have been affected by lockdowns with EBIT impacted by $33 million, particularly -- partially offset by the transformation benefits delivered in the period. Revenue was down slightly and margins were lower. However, activity levels have rebounded post-lockdown. Beach has seen a rerating in its share price, reflecting confidence in its development plan and production growth outlook driven by Otway and Perth Basin activities, including its first LNG contract. Q1 production was down 4% on the prior quarter. Strengthening oil and LNG price present upside opportunities. Contrary to what you might have read, SGH has no plans to divest Beach. While we've been approached by others, we believe there is significant value upside as energy prices continue to rerate upwards. Seven West Media has delivered a strong ratings performance and is well positioned to capture metro TV market share of 40% in half 1 FY '22. TV advertising spend is continuing to recover. Seven West Media is well positioned for future growth with ongoing delivery of transformation program benefits, great content to distribute across multiple platforms and improving balance sheet, having recently refinanced its debt facilities. And with our outlook, WesTrac is expected to deliver low single-digit EBIT growth. Coates expecting to deliver high single-digit EBIT growth. Boral expects some uncertainty challenges in FY '22. However, there's been good rebound in activity coming out of lockdown. At this stage, Boral does not expect the cumulative COVID impact for FY '22 to exceed $50 million and is focused on delivering a further $60 million to $75 million of EBIT benefits from its transformation program. Beach has provided production guidance of 21 million to 23 million MMboe and CapEx guidance of between $900 and $1.1 billion. And Seven West Media has upgraded its guidance and now expect FY '22 EBITDA to be 7% to 10% above consensus of approximately $260 million. Further guidance update will be provided at the first half results announcement in February, where COVID and supply chain disruptions are better understood. Finally, this is our standard disclaimer. With that, I'll now hand to Warwick Smith to provide a tribute to the Chairman on behalf of the Board. Warwick?

Thanks very much. Good afternoon or good morning, ladies and gentlemen. I've been asked and it's a privilege to give a tribute to the Chairman. Today marks, Chairman, a very significant occasion for you and for this company. And our Board has asked that, I, on their behalf, acknowledge your retirement today as Executive Chairman of SGH and recognize your unparalleled contribution to the group, its businesses and its people. You first became a Director of Seven Network Limited, this company's predecessor entity in June 1995. And since that time through your foresight and leadership, we have seen the group diversify and grow to become a substantial listed company, firmly within the top 100 ASX companies on a market capital basis. Pivotal to this growth was the decision by the shareholders in April 2010 to approve the merger of Seven Network Limited and WesTrac to form Seven Group Holdings. Your long association with WesTrac and Caterpillar has benefited the group and our shareholders. And WesTrac's annual revenues have increased to $3.8 billion in full year '21, which is a 70% increase on the year following the merger. What distinguishes this group is its disciplined approach to capital management, the quality of its market-leading businesses and the quality of its management and its people, many of whom are here today. The SGH model has evolved to empower its businesses to maximize their return to shareholders with the added value that SGH can bring. We are seeing this with Coates, Seven West, the group's energy assets and that process is underway with Boral, which is a truly transformative opportunity for the group and our future. Chairman, importantly, these businesses are providing high-quality jobs and skilled working environments for many thousands of our fellow Australians. I know that this is a matter very close to your heart and our various apprenticeship programs through WesTrac and Coates are supporting this commitment, which you personally champion. It also must be remarked upon that your commitment to the health of this nation extends beyond this company and that during your tenure as Chairman, you have given great service as a former Chairman to the National Gallery of Australia and currently is the Chairman of the Australian War Memorial and also have made a major contribution to perennial success of the great Telethon in Western Australia. Having been so intimately involved with our businesses throughout his long tenure, living and breathing them, the Chairman possesses an incredible technical and commercial knowledge across the many diverse industries in which we operate and invest, including expertise in television and media, industrial services, property & construction and oil and gas. His knowledge is reflected in the group's care for its people and their safety. His knowledge has also informed many of our discussions around the Board table and being instilled in the development of our leaders who you have mentored and through them to their staff. This is what SGH calls an owner's mindset, where we pursue a high-performance culture and continuously strive for efficiency and growth. As SGH Principal Founder, your owner's mindset, Chairman, will always be a part of SGH DNA now and into the future. We know that you will remain acutely interested and focused on the performance of the group as its major shareholder and as a strategic adviser. We also know that you are continuing your important work as Chairman of Seven West and in promoting the nation's interests. However, today, the Board wishes to thank you for your long and extraordinary service to the creation of this group and where it is today and as its inaugural Chairman, we extend you and I, on behalf of the Board, a very great thank you for all your efforts and all your commitment. Thank you very much, Kerry.

Thanks, Warwick. Thank you, Ryan. After all that, we'll now attend to the business of today's meeting. The notice completing the meeting has been in your hands for some time, and I'll take the notice as read unless there is an objection. Firstly, in answer to a pre-submitted question from a shareholder, I note that this year, the company has worked within the temporary measures establish by the government due to COVID and sent a printed proxy form and printed letter setting out where to download the notice of meeting to shareholders who elect to receive communications by mail. The company intends to revert this sending of printed notices of meeting to those shareholders for next year's meeting. Thank you. If as a holder of ordinary shares or a proxy or authorized representative, you'd like to ask questions or address the meeting, I'll take questions during the course of the meeting, which relate to resolution being put. Questions related to general business will be taken at the end of the meeting. I ask you to direct all questions to me. Please wait for a microphone before you speak. Show the red or yellow card you were given when you registered and give your name. I'll also take written questions using the Lumi AGM platform during the course of the meeting, which relate to the resolution being put. If you asked a question about 1 of the 6 items of business in today's meeting, please indicate the item number at the start of your question. There is also a link in the Lumi portal for shareholders and proxy holders to ask questions orally. Clicking this link will allow shareholders and proxy holders to enter a separate window where a moderator will invite them to ask the questions at an appropriate time during the meeting. If we experience delays today in receiving questions submitted by shareholders through the virtual meeting platform, we'll endeavor to come back to those questions during time set aside for general questions. Some questions may be amalgamated if we receive multiple questions on the same topic or resolution. The company has received a number of questions in advance of the meeting, which we'll address in relation to the relevant item. Voting today will be conducted by way of a poll on all items of business. Accordingly, in my capacity as Chairman, in accordance with the constitution, I demand a poll will be taken on items 2 through 6. I order you to provide enough time to vote, polling on the resolutions is now open. The voting icon is now visible in a Lumi AGM platform. Selecting icon will bring up a list of items and present you with voting options. To cast your vote, simply select one of the options. There's no need to hit a submit button or enter as the vote is automatically recorded. You do, however, have the ability to change your vote until the time I declare voting close at the end of the meeting. As you will see from the screen displays, a significant number of our shareholders vote by proxy. Before each resolution is put to the meeting, we'll display on screen the count of proxies as directed on the proxy form. As Chairman, I propose to cast all available undirected proxies in favor of each resolution. Results of the voting will be concluded once voting is closed and will be released to the ASX later today. So please look out for your ASX release to see the final results. First item of business is to lay before the meeting the financial statements and reports of directors and auditors for the year ending June 2021. There is no requirement for a formal resolution on this item, so the item is excluded from the proxy form and will not be voted on. Are there any questions on the annual accounts here under review?

Chairman, we have to take a pre-submitted question from a shareholder. What is the current level of debt and the debt equity ratio, please?

Thank you. As Ryan mentioned earlier in his address in relation to capital management slide, during F '21, the group increased its debt levels in order to fund the Boral takeover. On a pro forma basis, the consolidated $3.1 billion of debt for the combined SGH Boral Group is as at the 30th of June 2021 is expected to settle between $3.6 billion and $3.7 billion including financial close of all announced asset sales and completion of capital distribution. Debt reduction is a priority for the company, and our target is to repay a $2.97 billion bridge facility before June of 2022. We expect a significant distribution for our shares of up to $3 billion of capital return approved by the Boral shareholders subject to ATO approval. Are there any other questions?

Chairman, shareholders ask you to please confirm the materiality level for the group.

The auditors reported to the audit and risk committee that their assess materiality for the F '21 of $30.8 million based on the 5% profit before tax and significant items.

Yes, Richard. I've got a question about the sale of the fly ash business. At the time of the takeover, Grant Samuel valued that business at about USD 1 billion. But when you sell it, you manage to get $1 billion, too. So you made quite an extra amount of money from it. So I'm curious as to how that sale is going along, hopefully, without any hiccups.

The sale of the businesses in the U.S. has been concluded other than the fly ash business that are still unsold at this point. It's a subject of continuing negotiations at a level that's less than that predicted by Grant Samuel, but at a significant level. And the Boral is actively involved in bringing that to fruition. Of course, the other side of the coin is with the activity in America, the business is now performing so well. I think it's actually profitable about $140 million a year. So on that basis, we'd look to get a bit more money for it.

So is that because of the extra fresh fly ashes becoming available with the coal-fired power stations coming online?

Correct. Yes, as I understand it.

Well, unfortunate about the price, but I suppose that's what happens.

Any other questions? Are there any questions for the company's auditor or the company's financial statements for the year ended 30, June 2021? Thank you. Next 2 items of business. Items 2 and 3 relate to reelection of directors. No nominations were received from any other persons. David McEvoy and Richard Uechtritz retired by rotation and offer themselves for reelection. The first candidate standing for reelection is David McEvoy, who is retiring and being eligible, offers himself for reelection. David McEvoy has been engaged in upstream oil and gas industry for over 40 years in a variety of senior technical and senior executive and nonexecutive director roles. He brings an invaluable senior executive and director experience in the oil and gas industry to the Board, including extensive expertise in accounting and regulatory matters as well as the operation and strategic risk management. Mr. McEvoy is a member of the Audit & Risk Committee and a member of the Independent & Related Party Committee. Are there any questions on this resolution? The proxies votes for this resolution appear on the screen. Thank you. The second director candidate standing for reelection is Richard Uechtritz, who retires by rotation and being eligible, offers himself for reelection as a director of the company. Richard Uechtritz is a highly experienced entrepreneur and company director with a proven track record in building and realizing shareholder value. Mr. Uechtritz understanding of customer service markets and businesses are particularly beneficial to the Board and management, given the group's range of customer-facing operations and in his experience and investment, people and executive management. Mr. Uechtritz is a member of the Remuneration & Nomination Committee and a member of the Independent & Related Party Committee. Would you like to say a few words, Richard?

No, I'm happy with what's been up there, mate. So all good seeing David didn't say anything.

I had it prepared in case.

Has anyone got any questions?

Good morning, Chairman. Ian Graves from the Australian Shareholders Association, representing 54 shareholders. Mr. Uechtritz, we noticed that you have been on the Board for a number of years, 11 as far as I can tell. And what we are concerned about is that after or during this term, you will exceed 12 years, which is generally seemed to be the term of an independent director, which would mean that you would be considered nonindependent. Could you please give the meeting your -- what you proposed to do. And do you give a commitment to see out the term of your office?

I do. Well, obviously, it's not a -- it's not a one-way street. But if the Board continues to have faith in my expertise, I'm happy to do the full term.

So why should you still be considered independent from management?

Why wouldn't I be independent is the question. I mean I've looked up at the definition of independent directors. I was just a month ago, I stood for reelection of the JB Hi-Fi Board, of which I've been on at a similar period and ASA voted for me, for what is worth, your Victorian colleagues. And it's a little bit ironic that I wasn't considered when I joined the Board after retiring as an executive of JB Hi-Fi, I wasn't considered obviously as independent. But as time went on, I became, considered by shareholders associations such as yours, as independent. So the length of time seem to make me more independent, whereas now you're saying the length of time makes me less independent. So I mean, I don't fully understand it.

Well, I would have thought on good governance and some of the views of the ASX is that independents is deemed to be from the length of time of the director and also the -- what it shows to the rest of the society. And that's -- I'm disappointed to hear that you can sit here still considering serving your full term, and we will vote our proxies against your reelection. Thank you, Chairman.

Thank you. I note from the proxies on the Board that 99.61% vote in favor of Mr. Uechtritz reelection against this 0.27%. I think that shareholders unanimously have said how they feel, which is an endorsement. And in fact, how the rest of the directors consider Mr. Richard Uechtritz. We now move to the fourth item of business is to adopt remuneration report for the company for the financial year ended 30th of June, 2021. Despite the impacts from the ongoing lockdowns and border closures, F '21 was another year of strong results. All renumeration decisions with respect of FY '21 were carefully considered by the Board in the context of the current environment. While ensuring outcomes were aligned with shareholder interests. Accordingly, the incentive outcomes disclosed in the remuneration report reflect the strong financial and nonfinancial achievements across the group delivering the value-accretive transactions such as Boral. In FY '21, the Board adjusted the remuneration mix to have a greater proportion delivered as performance-based remuneration where KMP executives will only be rewarded for the achievement of the company's strategic business objectives, which align with shareholder outcomes. The '21 LTI award due to the ongoing impact of COVID pandemic and the uncertainty around long-term financial targets at the time of the grant, the Board made a determination to retain relative TSR as a single performance measure. The Board believes this decision strongly aligns KMP executive reward outcomes to the group's strategic objectives and maximizing return for shareholders through long-term sustainable value creation. I welcome questions on remuneration report for the year under review. Are there any questions on this item?

Ian Graves again from the Shareholders' Association. Mr. Chairman, we recognize the improvements that were made to the remuneration for last year. But we are still concerned about the EPS hurdle being removed and only having one hurdle for your LTI. And you had stated that you believe it aligns with or your management team and also the shareholders themselves. But our view is that only having the relative total shareholders return does show the performance that your company has undertaken against competitors, but your performance may well have been enhanced to the total shareholder return from something going wrong with your competitors or your model that people you compare with whereas we believe that the EPS, earnings per share, should also be considered. And you have given your reason, would you be -- prepare to reconsider that in the coming year?

The Board will take into consideration all the relevant items each time it looks at this [indiscernible]. But the facts are -- to think of any way our share price being determined by opposition, it's pretty difficult. We work in such a variety of industries, it'd be hard to imagine that in all of those industries, our competitors are suffering so much we're getting a benefit. We are in extremely competitive industries. When you look at WesTrac, it's very solid performance. WesTrac has over 200 direct competitors. So the share price is reflective of market conditions as much on company performance. Now if I care to go backwards and look at Seven West Media, where share price got down to a ridiculously low value of $0.10 when any reasonable person would have understood it was worth much more than that. It's taken 6 months for the market to realize that mistake, and start to rerate the company more appropriately. But if we valued executives on the share price, then in fact, they may be focused on getting the share price up rather than on the sustainable and building the profitability of the main enterprise.

Mr. Chairman, we are not concentrating on getting the share price up. We're concentrating on ensuring that the earnings per share is increasing and not just being impacted by the relative total shareholder return.

The earnings per share have been inclusive. I'm not sure what the issue is.

That's right. Well, we believe it provides a balance against the external measures that you are using.

If we were to apply that now, it would've been higher than we've already paid.

So you will not be...

This is my last meeting. What the Board do from this moment on is going to be for them to consider, not for me.

Well, that's a good legacy to leave. Now also, we are concerned that you still only got the 3-year period in which you can see the performance. And we would, as you know, like to see 4 or preferably 5 years, Will this also be considered by the Board next year?

Again, that will be up to the Board. My recommendation would be no. We're in an area where the change is so substantial and so quick, we need to respond to it and I think 3 years is an adequate measure in these circumstances. It's not like it was 10 years ago or 20 years ago, where we could rely on a continuing set of circumstances being constant. Today change is the only constant. And beyond 3 years, I think it's too long to value. But that's my personal opinion. The Board in the future might take a different view.

Thank you, the Chairman, and we'll be voting against it. Thank you.

Thank you. Remuneration report is up on the Board and the votes for are 96.3% and against 1.1%. I've been asked to advise you the vote on this resolution is advisory only and does not bind the directors of the company. Directors of the company, its key management personnel and their respective closely related parties can't vote in relation to this item except as proxies in limited circumstances. The poll on this will be taken at the end of the meeting. Item 5, grant on STI to Managing Director and CEO. Next item of the business relates to proposed grant of shares rights to the Managing Director and CEO, Ryan Stokes, under the company's short term incentive plan. This result of corporate and individual performance outcomes for 2021 and the MD and CEO was awarded an incentive under the SGH STI plan with 50% of the award to be deferred into share rights invest after 2 years. In terms of Mr. Ryan Stokes STI grants require that the securities to satisfy the STI awards be purchased on the market. Shareholder approval is not required for the purposes of the ASX existing rules. However, in the interest of transparency and good governance, the Board has determined a shareholder approval for the grant and the third share rights to Mr. Ryan Stokes resulting in 50% of this 2021 STI award. I'll take any questions on that now.

Chairman, we've received a pre-submitted question from a shareholder. What initiatives has Ryan Stokes delivered to deserve this bonus?

I thought that would have been pretty self-evident including the results of the year. He's put together a team of great executives who have delivered the performance that we've just seen for the year ending. This included not just the continuing performance of the businesses, all of which exceeded budget and expectations, but also the acquisition of Boral, which in itself was a major undertaking and was delivered in time, on budget and to precisely what was approved by the Board. We believe that these total remuneration is aligned with appropriate market comparators similar in size and complex to the SGH. Are there any other questions? As you'll see, votes posted on the Board, the for is 96.96% and against is 3.23%. And as directed, the poll will be taken on this resolution at the end of this meeting. Thank you. The next item of business relates to purpose of Listing Rule 7.4 and all other purposes, the issue of approximately 22 million ordinary shares pursuant to the fully underwritten institutional placement announced by the company to the ASX in April 2021. The placement was successfully completed by the company in order to reduce overall net debt, restore balance sheet flexibility and improved liquidity by increasing the company's free float from 38.8% to approximately 42.5%, enhancing the company's ability to deliver shareholder value. Listing Rule 7.4 allows shareholders to approve and issue with equity securities after decisions has been made. If they do, the issue was taken and approved under Listing Rule 7.1 and does not reduce the company's capacity to issue further equity securities without shareholder approval under that rule. Consistent with the company's approach to capital management, ratification of the approval of the issue of shares under the placement will ensure SGH returns as much flexibility and capacity as possible to issue additional equity securities into the future should the Board consider it appropriate to do so. Are there any questions on this matter? Proxies vote to this resolution appear on the screen and at 99.6% for. As I've directed, the poll will be taken at the end of the resolution at the end of this meeting. Thank you. Before we come to the end of the meeting and take polls on items 2 through 6. I'd like to open up the meeting for general questions from holders of ordinary shares. Are there any general questions?

Chairman, we've received a pre-submitted question. What action is the Board taking to ameliorate the impact of anthropogenic climate change?

I thank the shareholder for that because until that point in time, I had no idea what that meant. I now understand it's from human activity. And over the course of that year '21, our business is committed to taking action to pursue that our 2 fully owned businesses, operating businesses, Coates and WesTrac achieve net 0 Scope 1 and 2 emissions by 2040. We further committed to each of these businesses achieving reductions of 30% on its 2020 levels by FY '26 and 50% by 2030. Each businesses now have actions underway, such as reducing demand for electricity and scoping out opportunities to introduce solar type roof panels as part of long-term road maps to achieve these targets. This builds on actions each business is undertaking with their suppliers and customers to reduce Scope 3 emissions, such as using biodiesel and moving to hybrid and electric technology. Are there any other questions?

I know that you're undertaking a project in the Cooper Basin at Moomba in particular with respect to carbon capture and storage. I don't know how much you're spending on that project, but I can't really see any value from it flowing to shareholders. So it's simply a matter of virtue signaling or is there some going to the shareholders that I can't identify?

I'm going to let Ryan answer that question, please.

No, that's in relation to Beach's investment in the Cooper Basin joint venture project to reinject carbon, that Santos-led project. On Beach's analysis, it is a positive NPV on that business case, the ACCUs that are generated. So the carbon credits that are generated are may be positive over the period, and that's assuming a pretty conservative viewpoint around the value of those carbon credits, that's one aspect. The other aspect is the reduction in emissions from the project. So I think to the core question, it is a positive case that's assuming they deliver the project on cost and those ACCU values rise as anticipated. But overall, that was based on it being a positive investment case.

I wasn't where you were getting -- you were selling carbon credits as a result.

Yes.

Any other questions? Well, now we'll be taking items 2 through 6. Voting remains open on the Lumi AGM platform and will close shortly after conclusion of the meeting. Steve Hodkin from our Share Registry BoardRoom Limited, has been appointed the Returning Officer and will conduct the poll after voting is closed. For shareholders and proxy holders attending today's meeting in person, complete voting papers must be placed in 1 of the ballot proxies at the rear of the room. If you need any assistance from the BoardRoom, please ask for help. The results of the poll will be announced on the ASX later today. And just before I close the meeting, a couple of issues I would like to add. The company and the directors treat global warming very seriously. What they're doing to ameliorate and help offset our contribution is substantial, and it's a commitment they've made to improving how we go about our business. I'm looking forward over the years to seeing them achieve the objectives they've set. I think everybody is aware today, it's important to consider carbon. It's going to be important as to how we live our standard of living and achieve a carbon reduction and this company and the Board and the management are determined to achieve a better result. And with that, I'll finish my last meeting. Thank you, shareholders.