Stealth Group Holdings Ltd (SGI) Earnings Call Transcript & Summary

Terrific. Good morning, everybody, and welcome to the Stealth Group Holdings 2026 Full Year Results Presentation. And I'm Mike Arnold, CEO and Managing Director of the company, and it's a pleasure that we welcome everybody here today for an overview of the results, our financial performance as well as our strategy moving forward. So presenting today is not only myself, but also my Group Chief Financial Officer, Matthew Green. We're actually in Sydney presenting today. The control of the slide deck is actually back in Perth so as I go through the presentation, you'll hear me say next from time to time. That's just controlling the slide deck as we move forward. So let me just go to the next one. So the opening key messages, as everybody can read, we have had a really good year. We've delivered record financial results. In fact it's been a record company strategically, operationally and financially in FY '26. We reached sales of $165 million. We acquired the Hardware & Building Traders company for $22 million purchase and that was Australia's largest independently owned, privately owned buying group across hardware and industrial and now in safety. We have created a market-leading independent distribution ecosystem across both platforms of hardware, home improvement, building, industrial and safety. And we're now the third force in our markets behind Bunnings and Blackwoods, second of all with Metcash Group and now ourselves with a 1.4% market share. The largest holder with 23% market share being Bunnings followed by Metcash about 3.7%. Our objective is to be #2 force in the market and we are obviously #1, as I mentioned earlier, from an independent distribution perspective. We have materially expanded our group scale. We'll walk you through that and explain exactly what that's created for us on the back of the acquisition, about the integration aspects that have occurred in the last 8 months. We identified early on that there's $400 million of new annual revenue opportunity in the existing ecosystem, we can convert into revenue. Therefore, we've obviously got an upgrade of our guidance target, which I'll walk you through shortly. At the back of the acquisition process, we also had the opportunity to not only strengthen our balance sheet; but interest from institutional investor base, which raised $19.5 million selective to ensure that not only we increased the strength of our institutional investors, but also create a platform for growth for the future as other opportunity presented itself. Lastly, if I can just also mention that our market capitalization more than doubled and that's been a really pleasing result. In fact over the last 2 years, our share price has moved from $0.21 to about $1.30-ish today. So that's been really pleasing driven by the results and the events that I've just mentioned earlier. FY '27 has started really strongly. We have secured $100 million worth of new sales or revenue that will commence over the course of the next 6 months and that will have an annual run rate of $100 million, but obviously a part contribution to the FY '27 numbers. That now takes our company, once all that has fully commenced, to an annual sales run rate of $265 million or a revenue line that is around about $225 million, Therefore, material uplift in the first 7 weeks of FY '27. We also, as part of that runway, have another $130 million of new sales and revenue that we're working on. Today that is in negotiation discussions and planning for that to commence in the second half of FY '27. So significant contribution obviously to FY '28, but importantly, some contribution that will come forward into FY '27. So ultimately great transformational year, great start to FY '27. Our guidance towards FY '28 remains unchanged and we're obviously within reach of progressing that number with a host of new opportunities that continue to present itself. So our numbers on FY '26. So we can just go back in the coming slides and give you an overview of the '26 year. As I mentioned, we achieved the sales level of $165 million. Our EBITDA pleasingly is 8.7% margin, $14.4 million. Our NPAT increased by 86%. Our EPS has increased by 56%. We obviously are very strong from a cash point of view with $32 million in the bank with a low net debt over EBITDA. So pleasingly, really good numbers that sit behind the business as a terrific foundation for us to be able to move forward on. Those results are obviously supported by organic and inorganic growth. Our industrial and safety division; which particularly serves B2B commercial customers, businesses and organizations from large multinationals down to local workshops; performed really strongly and that continues to have resilient demand. In fact that business, which we acquired in 2018, Heatleys Safety, Industrial and Hardware, has a 36-year trading history of resilience in the markets that it has because of the products and also end markets that it serves. We invested obviously in the HBT or Hardware Building Traders platform that we acquired and that was through the integration of synergies and also making sure that as we headed into FY '27 and FY '28, the next phase of growth, the platform is available to be able to reignite those sales that we mentioned earlier in terms of our growth projections. Our consumer retail business; which essentially sells mobile phone, technology, accessories, screen protection, audio, power, et cetera through major chains; JB Hi-Fi, Officeworks, Coles, 7-Eleven, Harvey Norman, Retravision, et cetera. That in the quarter 4 of 2026 declined predominantly because 1 major customer decided to do a full range review in the categories that we supply. We were previously providing 3 of 14 categories and -- 3 of 14 brands and as we moved into FY '27, we were able in that range review to secure 6 of 7 brands that they'll now hold within their stores and online. Therefore, what that does is materially changes not only the numbers that was impacted in Q4, that materially benefits FY '27. In addition to that, we won 2 new brand distribution rights, which kicked off from July 1 and therefore, collectively we're looking at a 20% growth in FY '27 on that business over just a period of time. Like any organization particularly in distribution, we're always looking around productivity, efficiency and from a digital perspective, automation. That comes from a financial processing perspective and an operational processing, particularly removing anything that has rework or touched all in once. So we spent a lot of time continuing to bring efficiency into our operations. That improved our margin, but also ongoing execution of that is really paramount to how we move forward and this will be demonstrated by the headcount as we move forward whereby as people have left our organization, we haven't replaced those because of the efficiency that that brings. If I can just recap on Hardware & Building Traders for those of you who haven't looked at this for a period of time and what this essentially does. It's an aggregation of independent trade and retail businesses also with suppliers, independent owners and operators of their stores; which collectively come together for purchasing scale, but also creating distribution reach. There is 1,165 stores in that network, 490 suppliers. It has a purchasing ecosystem of about $650 million. Essentially only $7 million of that is converted into revenue recognized by the HBT business and essentially that's 1.1% of purchases they're collecting for a fee. As we move forward in our strategy, we'll demonstrate how we've converted that into a commercial model for a lot more value to not only the independent operators, but also to the suppliers. The strategic rationale is really simple. It's a larger market than we're operating in now across hardware and home improvement, which are new markets for us; in industrial and safety, which is our heritage, and also that links with the consumer part of the business. We have significant scale now that sits in our network that is very difficult to replicate. There's significance, as I mentioned, in terms of the runway that's moving forward. The earnings were immediately accretive. Therefore, from an acquisition profile perspective, the rationale absolutely ticks every boxes and it was transformational in terms of we're taking our organization forward. So what I mean by that now, let me demonstrate that in numbers. $770 million of group purchasing volume today, of which only $165 million of that is converted into sales and $145 million of that is converted into revenue. We'll show you how we're looking to convert a large chunk of that into revenue as we move forward. We have 1,200 new locations. In fact as of today we have 1,236 locations in our network, which combines company operations, independent retailers that are owner operators of their stores in the hardware, industrial and safety markets. In addition to that, we range our consumer products in about 3,500 different retail chain stores across Australia. So we have an extensive network in excess of about 4,700 store touch points. We have 1,300 suppliers and we'll explain how they fall into 4 key categories shortly. Our product range, as I mentioned, is in 29 key categories now and we have 236 employees at 30 June and that's decreased slightly on the basis, as I mentioned earlier, of the efficiency. So as some people have left our organization for other reasons, we've been able to bring efficiency into the business. So what that's done is essentially now put our business into what we see today at a glance. So strong execution across our group in FY '26 has essentially put us as the largest independent distributor across every workplace, industry, trade and home. Great touch points. There's only one other company being Wesfarmers of the same type that can touch all those points with the scale and the depth of offer that we can now bring, which supports our move to being #2 in the market. We have 5 operating businesses. That is Hardware & Building Traders, which is our ecosystem of purchases; we have Heatleys Safety Industrial; we have C&L Tool Center; we have Force Technology, which is a consumer retail business; and our H Hardware brand is an emerging brand that is currently under license with independent operators, but we're expanding that in the future. Simply, our business model is multichannel, wide range supplier of products and solutions. We have 3 pillars where we generate our revenue in distribution to business, retail and trade and also sourcing and supply solutions. And most importantly, how we grow is more products, more supply chain services, building supplier partnerships, selling more into existing customers and winning new customers, leveraging and optimizing our distribution network and we'll also continue to look at strategic acquisitions that obviously add significant value to the company. So it's a nice profile in terms of where we sit today. How that comes together in our business model from that slide into this? Essentially suppliers, 3 revenue pillars and 5 customers. So from a supplier point of view, we represent and buy from category leaders. We have strategic partnerships, which helps service our distribution chain. We have exclusive brands that we represent across the organization. We have our own label product. We also create white label product, which is own brands for different companies and customers. And what that essentially does in this portfolio, it allows us to combine the assets and infrastructure of company-owned operations with independent retailers and retail resellers in our markets to be able to cover the workplace, industry, trade and home. Dropping that into the 5 companies. We have our engine room of purchasing now of our preferred suppliers is Hardware & Building Traders. So emerging from a buying group to actually a value-added sourcing and supply chain solutions business to feed the channels of all the businesses. So that feeds independent operators, it feeds company operations. It holds on to all the preferred supplier arrangements, terms and conditions around negotiations and the ranging product development that we're looking to bring. It also manages and helps independent operators be really successful and have the tools to be competitive from a price point of view, from a customer proposition point of view and from a product category perspective to be able to compete with the major nationals supporting at the same time our company operations that we're looking to sell into end markets being Heatleys and C&L and the H Hardware business. So it's #1 in this market, Hardware & Building Traders. Heatleys is one of the leading businesses in Western Australia servicing the business market. It covers every industry in commercial and trade. We have 8 branches that covers Western Australia outside Perth with regional centers as well as South Australia. You can buy in-store, online, through a sales rep. We have account managers, we have customer call centers. It is only servicing businesses and organizations. C&L Tool Center covers all of the B2C and B2B environment, including trade. So it does have sales reps in the field. It also have people in store and online. In fact that's our biggest selling online marketplace and it's based in Brisbane. Force Technology, which I covered, you can see that that actually sells to a number of different brands through the major chains. We're #1 in terms of the mobile tech accessory space for brand distribution. We provide manufacturing solutions and the main distribution center is quite advanced in terms of its capability to be able to serve Australia wide. And lastly and largely in terms of H Hardware, that is a license operating model today. We're going to continue to grow those stores, 51 that are branded in that and that will be the brand that we move forward. It will be H stores and H Hardware is one of those stores that are operating under license. So it's a great portfolio, multichannel platform covering all those 4 areas I mentioned around the workplace, industry, trade and home. And you can see now that we've really cemented our position as a fantastic foundation to be able to move forward for our goals in FY '28. In terms of the market and just putting some context on the size. How we've grown on the left-hand side over the years since 2018 when we listed. The business was founded in 2014 by myself and significantly grown obviously in that time. So we built capability in the earlier period. You can see those brands on the bottom on the right-hand side. Some of those brands have now been absorbed and integrated into HBT or they've been consolidated in other areas. We then moved into consumer retail and then obviously the expansion in HBT. You can see the significance of all the different products and the range that we sell today in a significantly bigger market for us to be able to provide the comprehensive offering that I just showed you on the earlier couple of slides. So our business model, the companies that we operate, the markets that we're operating now is significantly larger. Our ranging and capability is significantly larger. Hence, our statement around being the largest independent operator and the third force within the market. This demonstrates the significance of what we have available and how we're going to have a foundation for us to be able to move forward. So the execution element of FY '26 has been quite comprehensive. We've obviously put out a number of releases in terms of our evolution in the last 12 months. We've consolidated that for your reading across these 12 different buckets. I'll just call out a couple of different areas that I haven't highlighted already. But clearly there's a significant amount of work that's been completed by the team. Our excellence through the organization has been a result of the performance of all our team across every aspect of our business to bring this together to essentially not only integrate, modify, evolve, consolidate where they can, centralize where they can and secure new arrangements; but also then bring expansion to our organization is a significant effort and recognition to their efforts. And one of our key strengths is the ability to be able to execute continually year after year and that's because of the people that we employ in our business. So a couple of key areas that I just want to mention that brings efficiency and is important for the future. One of those is centralized human resources platform that essentially all our payroll is now being consolidated from 7 companies into 1. Two, we closed 4 operations that were very similar to the operational day-to-day activities of Hardware & Building Traders and we've merged that into 1 ecosystem of sourcing and supply and that is now managed under HBT. So 32 independent operator stores, 126 suppliers and our exclusive product range being kept in the hardware and industrial part of our business has all been merged into that one operation. CAT and Harden and RIVO continues to expand itself. It's in 42 stores. We're looking to continually roll those out into a number of independent operator stores. There's merchandising in-store. And so on the CAT product in particular, it's a great brand and it's getting momentum and is well liked and this is a brand that is a mid-tier product and obviously catering to that work environment. We picked up 2 new branding distribution rights, PanzerGlass and also Tech21, recently that will contribute in FY '27, but the growth of Casetify and Belkin and Ember was in line with our targets. And the Ember range moving forward is not something that will form part of our business because we feel that there's better effort and return on investment in PanzerGlass and Tech21. We've also just recently put ourselves on the platforms of Woolworths, Amazon, JB, Hi-Fi and that will drive a smaller amount of sales; but pushing out our consumer retail products into there and also putting other ranges into those environments obviously gives us more access to more customers. Most importantly, which has contributed no income into FY '26 but will in the future and it's a sizable part of our growth, is within our technology platform with suppliers and members around central invoicing. That technology started or commenced from the 1st of July where we actually onboarded a number of different suppliers on to that and essentially that is a significant part of the $400 million runway that we've already highlighted. And lastly, before we go on to the operations and then followed by strategy is summarizing I guess the slides previously, but also as we're moving forward. So $500 million is our target, unchanged for FY '28 and that was upgraded from $300 million on the back of the HBT acquisition. We've got a really good runway moving forward. We've proven just or demonstrated the execution aspect and where we're ready from a scale and network perspective to move forward with the expanded product opportunity that that could bring. Our areas of growth are in commercial, are in trade, are in DIY. The importance of independent retail network is fundamentally a key component of our success, equally the preferred suppliers that work within our business are as important linked with our company operations. So the success, the investment and the effort that go between those 3 pillars is where ultimately the organization will execute and deliver on its strategy to FY '28. We have $100 million, as I mentioned, in new sales that's come largely out of HBT, the Heatleys and the C&L businesses, which again if you go back and you look at our organizational structure, that will define where they sit. And our consumer sales, reiterating that that will grow at 20% after winning those new contracts. And there's $130 million of new wave of sales opportunities that we're negotiating now that will come in and benefit also from the second half of '27, but full year of FY '28. And if I just take you back to one key point being Point #4 on the top right-hand side. So there's a $400 million sales opportunity, which we've now given insights to this over the last 8 or so months. We have a $770 million purchasing ecosystem. Essentially we're looking to convert the $400 million of the $770 million into sales and revenue, that today is only $165 million. Therefore, we're looking to grow from about a 21% capture to a 75% capture overall as we move forward. So that's where our runway will come from. That's where our existing ecosystem already has existing transactions going through it. We're now looking to convert. So on the back of that, I'll pass you on to Matthew Green, who will walk us through the financial results and then I'll come back in and I'll outline the strategy moving forward as well as the outlook in the period ahead. So thank you.

Thank you, Mike, and good morning, everyone. I'll take you through the financial results for FY '26 for the Stealth Group Holdings. Before I do get into the detail, I just want to note that these results are in line with our pre-released announcement we made to the market on the 17th of June. So for those that saw that and have crossed that, there won't be any surprises in the numbers today. What I will do now is take you through a bit more detail, work that through to the balance sheet, cash flow and the various elements behind that. So on the current slide, as Mike outlined, the headline group performance. We had sales up, we had revenue up. It's also worth noting on the statutory revenue was called out on a like-for-like basis that we're actually up 6.7%. The like-for-like being that the buying group activity, Mark alluded to previously, has now merged into the HBT where we recognize it on an agent basis rather than a principal basis and as such, the revenue doesn't flow through. On the EBITDA, we came in at $14.4 million, up 46% and margins expanding, as noted previously, from 6.8% to 8.7%. This result flows into a stronger balance sheet and net debt-to-EBITDA improving to 0.5x from last year's 0.7x. Cash balance of $32.1 million, up 122%. Earnings per share of $0.041. And as such, the Board has determined that a fully franked dividend would be payable at $0.015 per share and payable on the 30th of September. So across all our key metrics; sales, revenue, profitability, cash, gearing; we've seen a genuine step change in the group for the year. This slide just outlines our 5-year growth profile and CAGRs. Again some impressive movement and again to highlight that we're now seeing some inflection point and scaling benefit, as previously indicated, with our sales up 18.8%, but [ EBITDA ] up 59.8%. We expect that this scaling would bring the leverage model we have and it has done exactly that. I'll now move to the income revenue area. So for FY '26, it was the 12th successive year of growth and this slide overviews some of the key drivers of that growth. Our standout contributor in growing year-on-year was our HBT acquisition, which added $19 million in sales and $8.9 million in revenue for FY '26 remembering that HBT has only been in our numbers for 8 months from the November close. Looking at the base business, as Mike had previously alluded to that's pre-HBT sales, were up 1%. Within that, the industrial business performed very well at 9.6% up driven by growth across our key industrial PPE in safety and workwear categories, particularly into the mining sectors. One of the areas to call out was the consumer products area, which Mike had indicated earlier, which regressed 8.4%. This was largely on the back of the rearranging exercise at Officeworks, which as Mike indicated, is now complete. Force's position post that has significantly improved. And as such, adding that with the additional distribution agreements with PanzerGlass and Tech21 which are already contributing in the current year, we'll see Force up 20% year-on-year for FY '27, a positive turnaround. It's also worthy to note on this slide the other income line, which in particular, had 2 main areas. One is the $700,000 of incremental interest through our better cash balances and improved cash management, but also a $1.9 million fair value gain on the Force acquisition contingent consideration, which ultimately was lower as a result of the lower Force sales and therefore, is written back to the income in the P&L as a one-off nonrecurring item. Offsetting the other income elements were other cost impacts, in particular the nonrecurring HBT transaction costs just over $900,000 and other incremental and integration costs throughout the business as we implement growth profile initiatives. This slide is simply a profile of our segment both at the customer segment level and a product segment level across our main operating businesses of Heatley, C&L, Force and HBT. The key takeaway here is that is the current profile, but for future growth opportunities we'll certainly see a build-out of the hardware home improvement areas and driving further into the commercial and trade areas, which are great opportunities for our expanded business. We now move to the balance sheet. On the balance sheet side, we've obviously improved our balance sheet and we now consider it very robust to support the growth we have on plan. Net working capital invested increased to $18.7 million from $9.5 million. Key elements were cash obviously up to $32.1 million up from $14.4 million; our trade and other receivables, which were up at $22.9 million from $21 million, this is reflective of the quarterly in arrears billing and collection cycle that we have at HBT; and our inventories were up at $23.8 million, up from $20.9 million, again reflecting our go-to-market build for RIVO, CAT and Harden along with stocking for PanzerGlass and Tech21. So both of those increased our working capital without necessarily giving us the full impact of EBITDA trading outcomes for them, HBT for 8 months and the other brands as we roll those through. Other point to note is the intangible assets, which increased with the goodwill on acquisition of HBT. Excluding the goodwill, other intangibles really moved in relation with our ongoing investment in technology, digitization and our growth initiatives. Financial liabilities and borrowings also had a significant increase both in terms of the borrowing facility for the HBT, but also reflected the $10 million of deferred consideration and earn-out that relate to HBT. Return on capital employed, that was marginally down 14.2% against 16.7%, but again reflecting the increased capital base that we now have and have put in place for incremental growth throughout the business. We expect that to significantly increase in the next financial year. Overall, a very strong balance sheet that gives us the flexibility to take advantage of market conditions and pursue the growth profile while still managing any potential for downside risk. Calling out the capital expenditure items. Our gross capital expenditure was $4.1 million this year or 2.5% of sales, down from the $4.8 million last year. The spend, in particular I wanted to highlight the private label and exclusive distribution spend of $1.1 million, which included the development work on the RIVO product now ready for our go-to-market. Our technology systems where we continue to pursue technology as a driver of efficiency and automation, including as Mike highlighted, our organizational-wide HR payroll platforms. And our other technology, which is our IT hub and our central billing enhancements, which were through the HBT acquisition. It's a great proprietary tech that we acquired with that acquisition and we've now expanded that with the central billing profile and added to it some AI analysis and this now is really a powerful end-to-end deal engine to central billing profile for the business. Looking ahead, we expect the CapEx to return to our FY '28 targeted run rate of under 1.5% of total sales and that is consistent with our capital-light nature of our business as we progress forward. On the working capital. Turning to cash flow, we've got a statutory EBITDA of $14.4 million, which converted to cash from operations of $7.9 million, up from the $6.6 million last year. And the tax of $2.9 million, which gave us an operating cash of $5 million, broadly in line with last year's number. After capital expenditure and intangibles, we ended up with just under $1 million of free cash flow against the $0.1 million last year. I think there are 3 items that I wanted just to highlight from an operating cash conversion point of view, which impacted $6.4 million of operating cash. The first one being, as highlighted previously, HBT invoicing quarterly in arrears. This impacts to a value of $2.5 million. So invoicing cash collections for the FY '26 fourth quarter so the June quarter actually occur in July and August. So that would flow through naturally in the following quarter. The question obviously is how has that gone this quarter? I'm pleased to report it's gone very well. In fact it's been our largest single invoice and collection month in HBT's history. We also invested in stocking inventory to support the rollout of CAT and Harden, RIVO along with the PanzerGlass and Tech21. So we've added inventories of just on $2 million, which impacted obviously an increase in cash of $2 million without necessarily those flow-through sales appearing as yet. The third item is our noncash item as highlighted with the Force fair value gain, which is a noncash item into the EBITDA. We'd expect the cash conversion to normalize back to EBITDA over time subject to any further one-off impacts that we have with growth projects. Separately, our capital raise in November, December was oversubscribed and delivered $18.7 million in cash net of costs. This raise certainly strengthened our balance sheet and supports the execution of our integrated model, particularly the HBT growth elements, going forward. The next slide is really a visual of the waterfall of that cash movement highlighting the key areas and specific items called out as you go from opening cash to closing cash. Finally, on debt and leverage. Our net debt was maintained $7.7 million, up modestly from the $6.8 million in prior year and we continue to maintain a low level of debt as we move forward. Our gearing ratio is 12.6%, down from 18.3% last year. And our net debt, as indicated, net debt to EBITDA at 0.5x versus our 0.7x last year. These numbers reflect our continuing trend to lower our leverage and are at the lowest levels for 5 years. This again provides our flexibility in the business to take opportunity if it presents while also giving us significant headroom for the future growth initiatives. So in closing, that covers our financial results for FY '26. Certainly a transformational year that has laid [Audio Gap] targets. And I'll now hand back to Mike, who will outline the strategy and pathway to FY '28.

Thanks, everyone. It seems like we're having some technical issues. If you just bear with us for a minute. Yes, that's all good now.

Thank you, Kieran and Jess, for bringing that back on. I appreciate that. Thank you, Matt, first of all. I appreciate you covering that. Most importantly, a couple of key messages I just want to finish on with the finance section. Our sales have grown, our profitability has grown, our cash has grown, our balance sheet is a lot stronger, our debt has come down, as Matt said, 12 years in a row. It's our lowest debt position in terms of 5 years from a leverage point of view. So we've got a really strong balance sheet to be able to move forward and execute on our plans. I've been heavily led by Matt and obviously his teams in terms of our competencies, but also the integration aspects that we spoke about earlier, which is financially led by Matt and operationally led by our COO, Luke Cruskall, which is not here today because he's back running the operations. But importantly, their contribution and their team's contribution to this has been why we've got to the position that we have. So I just want to walk you through the strategy to '28, the growth levers and opportunities, the outcomes and measurable targets. So why that's in place now is from today as we move forward the organization, giving some benchmarks and a stake in the ground for you to be able to measure our success as we move forward. And the bridge of what that brings from a financial point of view from FY '26 to '28 is one example that we'll give of many. So taking you back, we built the framework. We have a big operational distribution system. We've got our 5 key customer segments, our 4 key supplier segments, we have 5 pillars of operations that are taking this to market. All of this now brings it together on what our execution will look like in the coming years. So whilst we talk about FY '28 target, this has really cemented the organization transformation of where we're going to be longer term into the future. We have a really strong pathway forward and we have advanced a long way forward in terms of that execution of those plans. So my key message is exactly that. Got a little bit ahead of myself, but significantly larger. If I just without confusing, there's $770 million of purchases that goes through our ecosystem so made from independent operators, made from company stores that go through our portfolio, which today only $165 million of that is taken. So that $400 million extra comes out of that $770 million. That is before we grow in markets or we grow market share or we win new business or any other key events that come along. We're just looking at that pie and saying how much of that pie can we convert. Most importantly, the success of that comes from the independent retailers, bringing more value to them to make them more competitive in the market, as I mentioned earlier, a bigger range in helping them be successful, more money in their pocket and more margins. So we want to help the independent industry across Australia be much more successful than what they are today. The heritage in that space, there is no organization like us who are trying to make independents as successful as what we're trying to demonstrate moving forward. Equally from a supplier point of view, the success of our business is the partnerships we have with suppliers. So bringing suppliers and bringing independence with our company operations altogether is the glue that makes our business really successful. Those 3 pillars are absolutely paramount to our future moving forward and we're really excited about what we can bring in that space. So our targeted outcomes remain unchanged. Sales, the difference between sales and revenue; which I've explained before, but I'll explain it again; is about $30 million to $50 million of rebates that are paid from suppliers that pass through the organization that are then onboarded to the independent members or company stores; $30 million to $50 million is about the number. So everything we're looking to convert moving forward is sales and revenue recognition. Why have we stuck with the word sales? That is how our business is defined. We're a sales organization. Therefore, we'll continue to describe ourselves and measure ourselves against that. So before I move into the next slide; stronger market position, greater scale, bigger earnings coming and our business is expected to be delivering stronger cash generation. So our strategy, central products and solutions for every workplace, trade, industry and home. There are 3 key areas of our value proposition, as I've just mentioned; partners, partners being independent operators and suppliers. Every industry is commercial being businesses and organizations and trade customers, then every home. So that is trade and that is DIY. There's elements of all those 3 pillars that consider to be extremely strong. There's a large element of those pillars that are nondiscretionary items, which brings the stickiness of resilience behind our revenue profile. That's why we like playing against all areas because it is every touch point that creates a new revenue stream for us. We have 5 key areas of what we would call strategic growth pillars. Simplifying the supply chain in the ecosystem. I'll give you an example of that. That's the example slide we have. Second of all, continuing to expand and innovate our offer. Making sure that we're adding more value to the partners that were in our organization and the end customers that buy our products. Growing in those 3 areas of commercial trade and DIY, which is why Matthew showed in his finance slide that sales mix. Therefore, from that perspective, we are able to show where we are today and as we move into future years, how that profile is changing, which does link financially to strategically how our business is evolving. Clearly with the network that has 1,236 locations across Australia in the hardware, industrial and safety side with another 3,500 retail stores that are operating within our network, we want to make sure we continue to optimize that and push more into those channels. But equally, we're looking to grow and continue to grow our network. That means things like in the convenience space, more retail stores. We've just gone into places like Harvey Norman because of PanzerGlass. We haven't been in there before. We're looking to expand into airports. We're looking to expand in petrol stations. They are fast growth areas, high traffic areas where people have the opportunity to buy more of our products. The hardware store are ranging and the ability in independents to have more products that they didn't previously have available to them that the Stealth organization has now been able to make on offer. Equally, those products that were in Hardware & Building Traders that the prior Stealth organization didn't have, we are able to sell more of that to existing customers a bigger adjacency. And then we're looking at productivity. So AI like every other organization is a hot topic. What we're looking to use it for is 3 key areas. One, make ourselves more efficient. How do we reduce anything that has multiple touch points from a processing perspective so we can be faster, more simplistic and utilize our resources more effectively on value-creating activities. The second part is how do we improve our operations? How do we ensure that the speed of goods that we receive, we replenish and then we distribute can happen within a faster real-time environment so that the customer is able to get their goods with convenience and with speed, as I mentioned. Thirdly, predictability. Predictability over our inventory. It's our biggest single operating variable asset. We have currently about $25 million worth of inventory that will grow in the products business. The just-in-time supply chain, the replenishment model, the predictability on previous history as well as forecasting for the future allows us to be able to utilize our working capital much better, ensure we've got the right stock in the right location at the right time; but equally help with our future expansion of fulfillment centers to be closer to the independent stores, to be closer to our customers is a key component of ensuring that we have the best-in-class inventory systems available to us. That comes from predictability. That's where our investment is in predominantly those 3 key areas. With the strategic outcomes, which I've already mentioned, most importantly, with a TSR of approximately 77% in the last 12 months, doubling our market capitalization in the last 12 months, but equally increasing that by 6x in the last 2 years is a demonstration of our focus on shareholder returns. We'll move to the next slide. So the next 2 slides, and I'm not going to go through all of these, we talk about the 5 levers that I just mentioned. What's the priorities? What's the opportunity that presents itself. Supply growth, channel growth, product growth and distribution network growth is all key components of what I've just explained. That becomes our priority, which then into the next slide, takes into how do we measure that success. So what are the outcomes we expect, what are the financial outcomes that we expect in terms of our result and in our measure and in our target sort of success. So moving forward, we were able to show these boxes on the right-hand side and walk you through what was the benchmark and what's our success. Therefore, let me take you through a couple of these because these are important. The first line in ecosystem simplicity. Greater monetization of the ecosystem of purchases that is made through HBT that recognizes higher revenue and sales and commercial profitability for the company, but also helps with our operating leverage, which improves margins. Therefore, today, we're looking to convert the 21% of that purchasing system to 75% target. That's our target. So significant runway of existing business that is already in our portfolio before we even go and change anything else. In doing that, it's not as simple as conversion; we want to demonstrate value to suppliers, we want to demonstrate value to the independent operators; which is where we come from improving or expanding and innovating our offer. So greater category selection, better pricing, more money in the pocket of the independent. For a supplier, a growth channel for them to be able to grow their business and sell more products and have more touch points and get their products more out to market. It absolutely creates a win for the supplier, it creates a win for the independent operator and clearly it creates a win for our company operations. All of that together delivers the outcome that we're looking for in terms of the Stealth results that we're showing you. Therefore, there is a number of things like preferred supplier arrangements and central invoicing that is currently underway. That is a big part of the $100 million that we've secured already and that onboarding process occurring. Some of those occurred on the 1st of July and that will continue to evolve monthly over the course of the next 5 months. And then we'll move into the next phase of that growth. The customer segments in terms of the 5 areas. So taking hardware and home improvement, the categories of those products into heat Heatleys and into the C&L environment allows us to be able to sell more products to existing customers that we're not selling with today. So convenience, speed, price is important, but not as important. We find when we are selling B2B, it's having the one-stop solution. So having a solutions team that is providing a range of products from one location that can take it to a job site, that can take it to a central consolidation point that actually can feed multiple sites with 1 solution and 1 part that they're dealing with is the way that the mid-tiers to the large organizations are growing. We can give a comprehensive range. That then expands to the employees and friends and family and every extension and you create a large ongoing spiderweb of opportunity whereby people can buy our products. So catering for the workplace, catering for industry, catering for trade, catering for home. So all those components, we have almost an endless assortment of products that is now available for existing customers and also for new customers. That is where our business grows. That is where we have confidence in our numbers. That is where our execution out of $770 million worth of existing business is demonstrated and looking to grow in new markets. That is where we're looking to be #2 in the market. We will grow our fulfillment centers, they're micro fulfillment centers, and we'll hold stock in those locations that we'll be able to feed the independent operators and also feed end customers that will be across Australia. We're looking to push the H Hardware brand nationally. So 51 at the moment. We're looking to take that to 200 over the next 3 years. And H will be the brand that we have moving forward. So it will be H Hardware, H Timber & Hardware, H Industrial, H Industrial & Safety. The H brand will be an Australian iconic brand over the next 3 to 5 years. That will be the brand that will be recognized under one banner linked with all the independent personal names, at least they'll be able to link it with part of the H network. That is our push. The other element that I just want to reiterate before I move on to productivity. Clearly, our ecosystem combining independent operators and company operations as well as retail stores, we're maintaining a capital-light approach. So the model is capital light. We utilize the infrastructure. That's the importance and the value of not spending significant capital opening up stores, closing stores, ranging stores. There will be an element we do that. But predominantly, that's why we support the independent space. We leverage them. We make sure they're successful and we utilize all those elements I've spoken about to make their stores better than what they are today and help them be successful. Productivity-wise, as I mentioned, all the elements we're doing around AI and efficiency supports our improvement in our margin. That was demonstrated in FY '26. but clearly a key component of having a lower cost to serve. So where does that all bring? I guess there's a lot of information there. In terms of a key summary on our pathway. There's $265 million of annual sales and [ $220-odd million ] of revenue that is recognized on an annual basis. The $100 million is rolling in over the course of the next 6 or so months. Therefore, from an annualized perspective, that's the run rate. We have another $130 million we're obviously working on and that will contribute into the second half. Therefore, by the time that we're sort of getting through to this time next year, we'll have a run rate just based on the last 7 weeks of $265 million. I'll reiterate that we're looking to convert 21% today of the ecosystem of purchases to 75%. We're looking to grow in commercial, as I said, expanding our building hardware suppliers range to those businesses and the customer offer and growing in trade. So this is a really small point of our business. If you go back to Matt's slide in finance for sales mix, you will see that trade is a small element of what we do today as revenue recognition. Therefore, the growth of H Hardware stores to higher, loyalty rewards programs, online having a single store platform, and we're bringing out, which in the near future, the launch of a new trade product offer and we'll explain more of that in a Strategy Day that we're looking to present to investors in October. So 13th of October so there will be more information shared there on what that trade offer looks like. We have looked at a number of different operations globally in the U.K. particularly and we're looking to bring that model into the Australian market, which is unique in its own right for the range that we have available. So they are the 3 main growth engines out of all the opportunities that sort of come through. And let me talk about simplification so this is the example that I want to bring. This is why in that purchasing portfolio or ecosystem of $700-odd million in HBT. So the arrangement is it's a complex web of relationships between member and supplier. So there's 490 suppliers dealing with individual independents, 1,200 of those. Members pay suppliers directly, suppliers manage payments and credit. The administration and marketing fee aspect is taken on the heritage from HBT of the purchasing that goes through that. It is complex, it's inefficient. It's an archaic way of dealing with the future model member into a central point with Stealth, the supplier into a central point with Stealth. We're able to bring a commercial model together as one primary source for suppliers, one primary source for members. It simplifies all the relationships that creates new revenue streams and there's value to the suppliers and members. And one example. One supplier has 273 independent operators that has to collect from every single month and has to chase those accounts to get paid. With us, they'll get one payment. It will be on a particular date and they'll get paid for all those 273 stores. That's efficient. From a member point of view, they have 103 different relationships as one store from suppliers. They're buying from all those different locations. We're looking to convert at least half of those in the next 12 months so they have one payment to make for 50 suppliers. Their efficiency, they can import all that information into their ERP system and accounting system and transactionally it's all done for them. It takes away the inefficiency in the back end, which makes everybody focus on growth and everybody focus on how do we serve more for the customer. So that technology investment that Matthew spoke about earlier and how we've talked about how do we create more value moving forward. This is a key component of what we call central billing and this is a technology platform that's underway. The success comes out of how do we grow for suppliers, how do we make independent operators have a platform that they get more value from, how do we bring efficiency in that whole chain. So it's a great commercial model, it's innovative in its own right because it forms part of a bigger plan, which is about creating a growth platform for members and suppliers. We'll move into the last 2 slides, which everybody will be happy to get to I'm sure. So in terms of trading outlook, significantly well, FY '27 started really strongly. We've already mentioned the run rate of new sales. We've added 36 new locations, which is great turning us to the 1,236 stores that we've mentioned. Matthew mentioned earlier about the consumer retail side with the brands of PanzerGlass and Tech21. We part launched iPhone 18. The presales of that have been really strong. That sits in all the major chains, which we're largely now touching, which we didn't last year, but we are this year. New capabilities are being executed around the commercial services model that I've just shown you in the web of complexity to simplicity. The expanded product range, the category growth is all elements and tool capabilities getting executed across the network and capabilities being developed. So the AI, the single brand H store; they're the elements essentially of all the components that I've spoken about earlier that brings me to the last checklist. And lastly, reiterating our FY '28 targets in sales, EBITDA margin, NPAT margin over sales, capital expenditure and brand distribution. So brand distribution is the preferred supplier components that are now all in HBT that serve independent operators, the consumer retail business that sells into retail, resellers and brands we represent and its company operations that serve end markets in the customer segments to commercial trade and DIY. So now to a big year, great year. It's financially, strategically, operationally been a successful year. It is really the foundation setting of the future. I know we keep reiterating our targets FY '28 because that's where we've really incented our business board. However, this is bigger than that. This is bigger about growing a platform as we move past '28. We've obviously got a 5-year rolling outlook. We'll give more insights to that on an Investor Day that we're looking to hold in Sydney on the 13th of October. There will be more information that's going to be shared about that. We'll give bit deeper insights as to what our program looks like and how we're looking to get to the next phase of elements in FY '28 and beyond. So we'll move to question time. I'm just going to pause. I'll let Jess look at any questions that have come through. If you can submit those, please, come back in a minute or 2 and we will then start answering any of the questions, Matt and I, that any shareholder has. Thank you.

We do have a small handful of questions. First off, we have [ Ron Shanda ], who has asked do you expect FY '27 EBITDA margin to improve on the 8.7% in FY '26?

Yes. So I guess the key elements of that are FY '27 will out surpass or will surpass -- outperform and surpass FY '26 in sales, revenue and profitability.

And he also asked, will you look to do further M&A before hitting your FY '28 targets or will you prove to market the target initially?