Brambles Limited (BXB) Earnings Call Transcript

Hello everybody. I think there's still a few people coming in, but it's 10:00, so I think we should get started. So my name is John Mullen, and it is a great privilege as Chair of Brambles to welcome you to the 2026 AGM and to declare the meeting open. There are copies of the Notice of Meeting and of the minutes of our last AGM in the registration area. Our Company Secretary has advised me that there is a quorum for the meeting. And so I propose to take the notice of meeting as read. Thank you. I'll start by introducing your directors, and I'll then take you through the process for asking questions. After that, I will present my address before handing over to our Chief Executive Officer, Graham Chipchase. When Graham concludes his address, Maxine Brenner, the Chair of our Remuneration Committee, will speak to you about our remuneration policy. And then when Maxine finishes, I will take you through the voting procedure and then answer questions from shareholders. Following that, I will then move to the formal part of the meeting. So let me now introduce your Board. So joining me here today from my far left is Kendra Banks; Maxine Brenner, Chair of our Remuneration Committee; and Graham Chipchase, our CEO. On my far right is [indiscernible], Nora Scheinkestel, Chair of our Audit and Risk Committee; and Robert Gerrard, our acting Company Secretary. Our overseas directors are attending by video today, and they are on the screen behind me in the middle of the night for the U.S., I think, so thank you. Elizabeth Fagan and Ken McCall joined from the U.K. and Priya Rajagopalan, Tony Palmer and Jim Miller from the United States. Also with us today sitting in the front row are Eliza Penny and Nathalie Maxwell from PwC, our external auditors for the 2026 financial year. Housekeeping PC on the screen, the evacuation map for the Wesley Conference Center. There are no planned evacuation test scheduled for today, but in the event of any alarms or emergencies, all attendees should follow the instructions of the Wesley Center supervisors and staff. They are fully trained to manage any such situations and ensure everybody's safety. We are webcasting this meeting for the benefit of shareholders who could not attend in person, and we will retain an archived version of the webcast on our website. There are 2 ways to ask a question today. If you are attending in person, you can ask a question from the floor. If you'd like to do that, at the relevant time, please approach the microphone, show your orange voting card or purple nonvoting shareholder card and give the attendant your name. When the attendance answers you to the meeting, you may ask your question. If you're unable to get to a microphone, then please raise your hand and an attendant will bring a microphone to you. And if you're a shareholder viewing our webcast, you can ask a question by selecting the blue hand icon on the top right-hand side of the webcast window. This function is available now, and questions can be submitted at any time. However, you will not be able to vote on any of the items of the business via the webcast. Although you may start submitting questions via the webcast at any time from now, I will not answer the questions until the relevant time in the meeting. The Company Secretary will read out questions of abate on your behalf. All the questions may be moderated. And if we receive multiple questions on the same topic, amalgamated together. We appreciate the time that it takes to type in questions. If we move on in the agenda before you have submitted your question, we will answer it at the end of the meeting. As I mentioned earlier, Eliza Penny from PwC is in attendance and available if any shareholder wishes to ask any questions about the conduct of PwC's audit, their audit report, the company's accounting policies or the auditor's independence. You can ask your larger question using the procedures, which I just outlined. We will be holding a poll on all of the resolutions before this meeting. Any shareholders attending the meeting in person and who wish to leave early, may place their completed voting cards in the ballot boxes by the exit doors, and I'll explain the voting procedure when we reach the formal part of the meeting. So I will now open the poll and turn to my address. [Voting]

So the 2026 fiscal year demonstrated strength and financial resilience of Brambles as the business navigated increasingly challenging operating conditions. It also reinforced the importance of Brambles strategic direction and the value of the investments that we have made in recent years to strengthen the fundamentals of the business. Over the course of the year, Brambles continued to win new customers in all regions, improve the safety of its operations and progress the strategic initiatives that are enhancing the customer experience, strengthening network performance and supporting long-term value creation. At the same time, management responded decisively to the short-term challenges that emerged in the U.S. business during the fourth quarter, placing customers at the center of every decision. The Board remained closely engaged as the business navigated these challenges, and we're confident management has the right plans in place to strengthen the resilience of our U.S. network for the long term. Despite the short-term challenges, though, total value creation for the year was 9%. So Brambles remains a highly profitable and cash-generative business with the capacity to continue investing in future growth opportunities. while delivering attractive returns to shareholders. And we remain confident that the challenges in our U.S. business will be resolved by the end of the first half of fiscal year '27, with an expected return to value creation in line with our investor value proposition from the second half of fiscal year '27. Over the past 5 years, we've invested approximately USD 1.5 billion across the group to strengthen Brambles' competitive position by improving the way it serves customers, reducing the capital intensity of the business and enhancing the efficiency and sustainability of its operations. These investments have also built the digital capabilities that are unlocking new sources of value across customer supply networks and Brambles own operations. The Brambles of the Future strategy launched last year, builds on these foundations to connect and illuminate global supply networks, making them more resilient and regenerative. The Board firmly supports the disciplined investments being made through the Brambles of the Future strategy to enhance the customer experience, strengthen network resilience and expand digital capabilities. These investments are critical to driving a step change in innovation and further extending Brambles' long-term competitive advantage and the role that it plays in shaping the next phase of pooling. Serialization Plus is 1 strategic initiative. I've lost the prompt. I've got a hard copy here -- now it's to come back. Something I said. So I'll start again. serialization Plus is 1 strategic initiative that has the potential to strengthen all aspects of Brambles business while delivering benefits to all stakeholders. I guess you thought I'd remembered all this. By uniquely identifying every pallet that provides greater visibility across supply networks and generates rich operational insights that Brambles can use to improve the efficiency and sustainability of its operations while delivering additional value for its customers. The progress with Serialization Plus during fiscal year '26 has been particularly encouraging. In Chile, the rollout of the effortless service offer to all customers has eliminated the administrative burden of declarations and physical audits, enabling more seamless and efficient interactions. And this has significantly improved the customer experience. as evidenced by the 9-point increase in the Net Promoter Score in Chile during fiscal year '26. It's also demonstrated clear revenue benefits from Serialization Plus contributing to 15 net new business wins in fiscal year '26, while greater visibility of pallet movements has highlighted opportunities to improve network productivity, asset efficiency and other cost savings as well as additional revenue streams. The Board believes that Serialization Plus will become an important long-term differentiator for Brambles. Before deciding on the potential rollout in North America, we need to assess the customer response to dynamic pricing and opportunities to use Serialization Plus data to improve damage rates, drill times and other drivers of the cost to serve for our customers. These learnings from Chile, together with the work underway to optimize the technology and economics in North America will inform our decision, which we expect to make during the third quarter of fiscal '27. The strategic investments that we're making for the future are supported by the structural improvements we have made to the financial profile of the business through transformation. Today, Brambles generates higher and more stable cash flows operates with greater capital efficiency and has a strong balance sheet. Together, these provide the financial flexibility to reinvest in the business and deliver attractive returns to shareholders. This financial strength allowed us to return approximately USD 1.2 billion to shareholders during the year, including increased dividends and the USD 509 million in on-market share buybacks. Importantly, these returns were delivered alongside increased investments to support our customers in the U.S. and progress strategic initiatives across the group. In May 2026, the Board announced an additional $400 million share buyback. And this reflects our confidence in the underlying strength of Brambles, the resilience of its cash flows and our disciplined approach to allocating capital between reinvestment and shareholder returns. To date, we have completed $218 million of this buyback and the Board will consider future opportunities for additional capital returns in accordance with our capital allocation framework, which is outlined in Brambles' 2026 Annual Report. So as Brambles enters its next phase of growth. It's important that the remuneration framework supports the attraction, retention and motivation of leadership talent across the organization. Executive remuneration must also remain closely aligned with Bramble's strategic objectives and the creation of long-term shareholder value. During fiscal year '26, the Remuneration Committee undertook a comprehensive review of the remuneration framework to ensure that it remains fit-for-purpose and supports these objectives. Following extensive consultation with shareholders and other stakeholders, the Board approved a number of changes designed to strengthen the alignment between executive remuneration, Brambles' investor value proposition and the way that the business intends to create value over the long term. The existing remuneration framework has served Brambles well. It has supported improved returns and reinforce capital discipline across the business over many years. However, the Board believes that the new structure is better suited to balancing sustainable earnings growth, disciplined investment for the future and sustainable shareholder value creation. The Chair of the Remuneration Committee will shortly provide further details of the review, the proposed changes and the remuneration-related resolutions that shareholders will be asked to consider today. Before closing, I would like to briefly touch on Board composition. So the stewardship of Brambles and the support of its long-term strategic direction are among the Board's most important responsibilities. This requires a Board with the right mix of skills, experience and perspectives to support management and provide effective governance. The Board renewal process undertaken over recent years has strengthened the Board's collective capabilities and positions it well to support the next phase of Brambles' growth and value creation. This breadth of experience is particularly important in a year when the business has had to address short-term challenges without losing momentum on key strategic priorities. The Board maintained focus on both, ensuring near-term challenges were effectively addressed. We're continuing to oversee the investments and initiatives essentials to bring long-term success. As I have outlined today, fiscal '26 demonstrated both the resilience of Brambles and the importance of the investments that we've made to strengthen the business and position it for future success. On behalf of the Board, I wish to thank our people for their continued dedication and commitment and to our customers for their ongoing partnership and trust. And I'd also like to thank our shareholders for your continued support. Your confidence in Brambles allows us to pursue our strategy with conviction and maintain focus on delivering sustainable value over the long term. With that, I will now hand over to our Chief Executive Officer, Graham Chipchase.

Thanks, John. Good morning, everyone. FY '26 was a year of continued progress for Brambles, underpinned by resilient financial performance. disciplined execution of our strategy and ongoing investment in the customer and digital capabilities that will support Brambles in the long term. These achievements reflect the commitment of our people whose focus on customers and our strategic priorities enable us to keep growing the business while responding swiftly and decisively to the challenges that emerged in the U.S. As we outlined in our May trading update and FY '26 results, the repair capacity constraints that emerged in parts of our U.S. service center network did not arise from 1 single issue. Rather, it was the convergence of several factors that reduced repair throughput in our network from the fourth quarter and affected our ability to fully meet customer demand and onboard new business. Our immediate priority was to improve pallet availability and restore service for customers. We acted quickly by increasing pallet relocations and running extra shifts and over time across our network. We also purchased 1.3 million new pallets in the fourth quarter of FY '26 and a further $1.4 million in the first quarter of FY '27 to support customer demand. We remain on track to purchase a total of 2 million pallets in the first half of FY '27. Together, these actions have improved service levels with no lost customer orders due to repair capacity constraints since mid-June 2026. At the same time, we're taking steps to strengthen the resilience of our U.S. network for the long term. Throughout FY '27 and FY '28, we will increase repair capacity across our U.S. network by approximately 20%, diversify our subcontractor base to reduce concentration risk and establish a specialist response team that can be deployed to manage any future disruptions. So far, we have increased underlying repair capacity in the U.S. network by 3% compared with April 2026 levels, supported by the addition of approximately 40 repair benches across our network and other initiatives to increase repair capacity at existing repair service centers in the first quarter. We have plans in place to add a further repair bench networks to the network and open 6 new repair service centers in the second half of FY '27, followed by a further 2 in FY '28. To date, the benefit of this additional repair capacity has been absorbed by inefficiencies at service centers that were affected by subcontractor turnover. During the first quarter, 2 of these service centers transitioned to new management and we have plans in place to transition the remaining affected service centers by the end of FY '27. We remain on track to resolve the repair capacity constraints by the end of the first half of FY '27 and in line with our original expectations. The developments in our U.S. business have highlighted the importance of the network modernization initiatives underway across the group focused on strengthening resilience supporting our service and quality commitments to customers and underpinning our growth ambitions. Across our markets, customer and retailer supply chains are evolving with increasing use of automation throughout their operations. As a result, customers need pallets that are consistently repaired to high standards, making quality and important differentiator for Brambles and a source of competitive advantage. To ensure we are meeting customers' needs, we are lifting the repair consistency of our pilots through enhanced and more frequent quality audits. Additionally, we are accelerating the rollout of automated end-of-line inspection equipment and introducing new quality measures that capture actionable insights from customers about their pallet quality experience. Another central part of our modernization agenda is strengthening the key operating capabilities that underpin the agility of our network. This includes leveraging data AI and our digital insights to improve how we plan, collect and redistribute pallets across the network. We are also revising our strategic approach to subcontractors moving towards value sharing partnerships that better support our safety, quality and productivity priorities while allowing us to serve customers more effectively and reliably. As we continue to focus on quality and safety and as competition for labor increases, our Service Center of the Future program will support the move towards a touchless repair process. Beyond quality benefits, this has the potential to improve resilience, safety and efficiency and reshape how our network operates. During FY '26, we began work at a dedicated facility in Texas where we will develop, test and refine the modular technologies and processes that can be scaled across the network in the next 3 years. This is an important step towards our goal of having a first touchless plant operational within 5 years. More broadly, we made meaningful progress across our Brambles of the Future strategy, investing in initiatives that improve the customer experience, strengthen operational performance expand our digital capability and support our sustainability ambitions. Across the group, we improved the customer experience by simplifying their interactions with us as well as investing in product quality and service performance. With the exception of the U.S., these efforts help lift our Net Promoter Score and collection metrics while maintaining best-in-class delivery performance across the group. As part of our work to illuminate supply networks, we further developed our portfolio of digital customer solutions. These tools provide customers and retailers with supply chain insights to help protect product quality, improve promotional execution and make more informed operational decisions. Operational excellence also remained a priority. We achieved a 10% improvement in safety performance to deliver our best year on record, while continuing to remain focused on initiatives that support asset control and operational productivity, both essential to delivering a more reliable and efficient pooling model. FY '26 also saw us launch Brambles 2030 Sustainability Program building on our achievements to date and marking the next phase of our ambition to create regenerative supply networks. We have made early and encouraging progress against our targets as we bed down the strategy and measurement frameworks that will support our delivery. This included initiating regeneration activities across approximately 10,000 hectares through partnership with Wild Trust in South Africa as part of our 5-year target to regenerate 2 hectares of land for every hectare required for our timber needs. Looking at our financial performance for FY '26. The result was in line with our revised guidance in May and reflected earnings growth, margin expansion and strong free cash flow generation. Our sales revenue increased by 2% on a constant currency basis. This included volume growth of 1% and reflecting strong net new business growth of 3%, which more than offset a 2% decline in like-for-like volumes as a result of weaker consumer demand in the U.S. and Europe. Underlying profit increased 4% at constant currency and included a USD 90 million adverse impact from the U.S. repair capacity constraints. Excluding this impact, underlying profit growth was 11%, reflecting disciplined cost to serve recovery as well as benefits from our ongoing efficiency and cost management initiatives. We also delivered free cash flow before dividends of more than USD 1 billion for the second consecutive year. This supported a 16% increase in total dividends to USD 0.46 per share, representing a dividend yield of 3%. Combined with EPS growth of 6%, this delivered total value creation for shareholders of 9% in FY '26. Finally, our return on capital invested increased 0.4 percentage points to constant currency of 22.6%, reflecting our disciplined approach to capital allocation and focus on productivity improvements. Looking ahead to FY '27, we expect to continue delivering earnings growth and strong free cash flow generation after including the additional costs and investments we are making to resolve the repair capacity constraints in our U.S. business. Our financial guidance for FY '27 remains unchanged, with expected sales revenue growth of 2% to 4% and underlying profit growth of 2% to 6% on a constant currency basis. while free cash flow before dividends is expected to be between USD 800 million to USD 950 million. We've also reconfirmed our FY '28 target to expand the underlying profit margin by at least 3 percentage points on the FY '24 baseline. This reflects the short-term nature of the U.S. challenges, our confidence in the recovery actions underway and the expected benefits from continued investment in productivity, digital capability and customer experience. These financial outcomes are dependent on a number of factors, including prevailing macroeconomic conditions customer demand, the price of lumber and other key inputs as well as the efficiency of global supply chains and movements in FX rates. In summary, our achievements in FY '26 showed the underlying strength and financial resilience of our business and reaffirm the strategic direction Brambles is taking. We acted decisively to address the challenges that emerged in the U.S. while continuing to invest to strengthen our network, improve the way we serve customers and support sustainable value creation over the long term. We remain confident in our strategic direction and the progress we are making to build the Brambles of the future. Thank you. I will now hand over to Maxine Brenner, Chair of the Remuneration Committee.

Thank you, Graham, and good morning, everyone. At Brambles, our remuneration framework is designed to attract, retain and motivate high-caliber leaders and talent across the organization while ensuring their interests remain closely aligned with sustainable shareholder value creation. In doing so, it seeks to align executive remuneration to the delivery of Brambles strategic objectives and expected behaviors in line with our code of conduct, shared values and risk appetite. The framework combines fixed remuneration with an at-risk component that is variable and directly linked to Brambles performance. At-risk remuneration comprises 2 elements: the first is the short-term incentive, half of which is received in cash, with the other half being received in deferred share awards, which vest 2 years from the date of grant. The second is the long-term incentive share rights that vest 3 years from the date of grant, subject to performance conditions, followed by a further 12-month holding period. Half of the LTIs are linked to financial performance conditions with the remainder assessed against Brambles relative total shareholder return performance versus 2 external indices. As John mentioned, during FY '26, the Remuneration Committee undertook a comprehensive review of Brambles' remuneration structure. Following this review, the Board approved changes to executive remuneration from '27 and the most material of which is an updated LTI framework. Central to the revised framework is the adoption of a total value creation or TBC measure, that is more closely aligned with Brambles investor value proposition. The TBC measure will combine diluted earnings per share growth with dividend yield over a 3-year period, creating a clear link between executive reward outcomes and key drivers of shareholder returns. Delivering Brambles investor value proposition over the 3-year period will achieve at least threshold performance. To achieve maximum vesting will require sustained performance over the vesting period that is likely to reflect stronger than market earnings growth and superior shareholder returns. The Board's decision to replace the existing sales growth and ROCE matrix for the LTI would does not diminish the important role it played in improving returns and reinforcing capital discipline. Importantly, capital discipline remains a core element of the framework with a minimum 20% ROCE required for any vesting of the TVC component of the LTI. This ensures that vesting outcomes continue to reflect disciplined capital allocation and investment decisions. Under the revised LTI structure, 60% of the award will be linked to TBC and 40% to relative total shareholder returns. This component will continue to be measured over a 3-year period with performance assist equally against 2 external indices. In line with general market practice in the U.K., the post-vesting holding lock on LTI awards granted from F '27 onwards, will be increased to 2 years. As part of the annual remuneration review, the Remuneration Committee also undertook a benchmarking exercise for executive leadership team roles to ensure remuneration remains competitive and supports the company's objectives. Given the majority of Brambles executives are based in the U.K., the Remuneration Committee considered the U.K. market to be the most appropriate benchmark. Brambles' remuneration philosophy is to position target remuneration at the medium level of the appropriate comparator group of companies with an opportunity for remuneration to reach the upper quartile where there is outstanding performance and proven capability. We believe this philosophy remains appropriate and continues to drive a high-performance culture. The benchmarking exercise confirmed that the majority of the ELT are remunerated competitively against the U.K. market and the remuneration packages for those ELT members will remain unchanged. However, the CEO's remuneration was positioned between the lower quartile and median of the comparator group, while the CFO's remuneration was below the lower quartile. The board has therefore proposed changes to their remuneration arrangements. For the CEO, both fixed and STI remuneration will remain unchanged, while the target LTI opportunity will increase to 165% of fixed pay and the maximum will be at 25%. This will position the CEO between the median and upper quartile of the U.K. benchmark, consistent with Brambles' remuneration philosophy. Additionally, this will also position the CEO between median and upper quartile against the Australian benchmark. For the CFO, fixed remuneration will be increased by 15% effective January 2027 followed by a further increase of 5.5% in F '28. The STI will remain unchanged, while the LTI opportunity will increase to 120% of base pay at target and 200% at maximum. These changes will position the CFO's target total remuneration at the median of the U.K. benchmark and between median and upper quartile against the Australian benchmark. Turning to the F '26 remuneration outcomes. Reflecting Brambles F '26 performance, including the financial impacts of the U.S. repair capacity constraints, the annual STI outcomes for executive key management personnel range from 29% to 68% of target. These outcomes were primarily driven by performance against cash flow from operations and personal objectives as underlying profit for the group in most regions was below target. Strong total shareholder return performance against 2 external indices resulted in 45.5% of the LTI opportunity vesting, while there was no vesting under the sales growth in ROCE matrix. As part of its review of F '26 remuneration outcomes, the remuneration committee also carried out its annual assessment of any behavioral events or incidents which occurred during the year that might warrant adjustments to all or part of an executive's incentive-based remuneration. I'm pleased to report that no such incidents or events were identified through this process. For more information on our remuneration strategy and the changes being implemented for F '27, please refer to the remuneration report on Pages 51 to 71 of our 2026 annual report. The remuneration report and the changes to Brambles Limited performance plan proposed will be subject to shareholder approval later in the meeting. Thank you.

Great. Thank you very much, Maxine. So I'll now take you through how to vote. If you're entitled to vote, you will have been given an orange voting card. You can vote on each resolution by placing a cross in the for, against or abstained box for the resolution. Ladies and gentlemen, before moving to the formal part of the meeting, I'll now answer questions from shareholders. I'll start by responding to the questions raised by shareholders prior to the meeting. This year, we received 1 question on the actions being taken on the repair capacity constraint issues that we faced in the U.S. business. A comprehensive plan was outlined at the FY '26 results. that provides a pathway to resolve the repair capacity issues by the end of the first half '27. Many of these actions were also outlined by Graham. And so I believe that this question has been answered. I remind you that only shareholders or their proxies or company representatives that are attending here in person are entitled to speak at this meeting. To maximize the opportunity for all shareholders, I request that you ask only 1 question at a time. For our shareholders viewing the meeting via webcast. I remind you that you can ask a question by clicking on the blue and on the top right-hand corner of the webcast window. I'll answer questions in the following order. First, from those attending the meeting in person. And second, those asking questions via the webcast. So with that, are there any general questions in the room?

Mr. Chairman, we have a question from a shareholder, Mr. William Prentis.

I've got a few questions but I'll only ask 1.

I'm sure there will be time.

The first question is on the share buyback. And I know it's probably in your report here somewhere. But what criteria do you use to determine whether you'll give shareholders back in the form of cash or you go back to the market and buy it. The reason I asked that is that there's probably something in here that tells me that, but reports a couple of hundred pages and I don't have the time. But it implies that when you go and buy it in the market, you feel it's a good buying in the market. Otherwise, you wouldn't buy converting 1 asset, let's say, $1 billion or whatever it is and buying that so that the shareholding -- the value of the company goes down $1 billion are saying, well, that $1 billion that we're buying there is actually worth $1.5 billion. So what criteria do you use? And how do you determine whether it's been successful? Because in a lot of cases, they say, when you do a share buyback, it will reduce the number of shares, which will make in scarce and the price should go up. I'm not really a big fan of share buybacks because I think they've got to be done properly, for example, if you're doing a share buyback at $50, you'd say, no, that's way too high. But you must have a criteria which says $18 is really good buying. But I prefer to get the cash and then for you not to make the judgment on investing that sort of money for the shareholders. So they can go out and determine how they deploy their cash.

That's a good question. Let me have a go answer it. So obviously, what dictates all of the action is how much cash the business generates. So there's a big focus on cash generation over the last few years without available free cash flow, you can't do any of these things. Then you have to balance how much we need to invest in the business from that free cash flow, then how much is left after that to distribute to shareholders. And there are several ways of doing that. There's the dividend every year, and we try to maintain a sustained steady dividend growth, which you see in cash. You can also do buybacks, as you just mentioned, which I think is the most effective way because you are reducing the number of shares on offer on issue, as you said, as a result, the EPS is going up for all those shares that remain and they can also do a one-off special return, which happens sometimes. Trouble with that is, it's -- once it's gone, it's gone. There's no sustained benefit, whereas the share buyback is a sustained benefit is the EPS is going up. Normally, the one-off specials are done, if you maybe have a big sale of the part of the business or something like that, it's not usually done just in an ordinary run of the mill year. So those are the decisions that we have to make as a board, and we have to balance up all of those different computing components and reach a decision what we think is best.

One sort of variable in that is actually the share price.

Yes, sorry.

And my sort of -- my question is, you've done share buybacks has it worked? How has the share price gone up? Your EPS in theory should go up, and therefore, your share price should go up based on a month. And is it working? Because sometimes you might buy that share back at a value that is too high. And a lot of time, companies do share buybacks probably at the wrong time when they are generating a lot of cash. where the share price may be somewhat inflated because they are doing very, very well. And it's probably unlikely that a share would -- a company does a share buyback when they're doing poorly, which is probably 1 of the better time to do it if you've got a good [indiscernible].

Which is absolutely a better time. Yes. No, good a good point. I forgot to mention, obviously, if we do a share buyback, you assess the value of the shares at the time. If you think you're buying them cheaper than the long-term total value of the company, then you buy them. If the share price is already at what 1 thinks is a high level and represents real value, then you wouldn't. So you're absolutely right. And that's why actually to contra what you said and when times are bad for a company and the share price is down, that is the time to buy back. SP-4 It's probably the time when the company doesn't have any cash, I can't do it. But SP1 Well, that's true. But equally -- and to your point about as you're working. You can't draw a linear line. Yes, you can on the EPS is going up and EPS increasing should flow through to share price. How things happen as well, the ups and downs and so you can have a pin exact amount to each decision.

Right. So how do you determine we're not going to buy shares at $25 will buy at or buy it at 30 or whatever. You must come to a point where you say, we'll buy if the share price is below a certain amount, probably has to be quite fluid, too, because I should imagine that business changes, circumstances, changes and that sort of thing. So how do you determine that price?

Well, that's exactly what we do. We have the eagle eye of our CFO, who's sitting in the front, who -- and he and the CEO need to sign off that we are buying what we believe is value additive to the company.

Did they get some sort of spreadsheets that they work out and do all that sort of stuff?

More than you can imagine.

Like Excel spreadsheets or something? Okay, there should be share analysts or something like that.

He sleeps with a spreadsheet under his pillow.

Well, I should -- I was speaking to 1 of the other guys from finance, and I just said I expect them to eat, sleep Brambles.

We all do. We all do.

And we expect that of you view. Okay. I've got some further questions but I'll let other people ask.

Right. Anybody else out there? No. Oh, sorry. Let's get a microphone there.

You forecast the efficiency level to increase. What's happening with the staff levels?

With the staff levels?

Yes.

They are -- I don't remember exactly what percentage you would have moved, minimal. A couple of percent. Pretty constant. Well, there are always losses. There are programs that are efficiency forecast loss. Lots of personnel. No, I can't say that. That may well be. But there hasn't been any substantial losses to date, and we're not planning any substantial losses at the moment. But you never know where the world takes you. Yes, please.

I realize that Brambles operates largely overseas, and there is a certain percentage of the dividend that is franked. Can you give an idea of the proportion of the dividend that will be fully franked going into the future? And whether the Board is considered a why to maximize franking credits to Australian shareholders.

What percentage are we at? 15? Yes. It's low because, obviously, as you've said, we -- 93% or 92% of our revenues are over. So by definition, that's the deciding factor.

The question now is, have you guys examined was that you can somehow stream those franking credits to Australian shareholders. For example, in buybacks, for example, or -- I mean where...

I'd say we maximize tax efficiency, but I don't think we're going beyond that.

[indiscernible] is tax efficiency.

Yes. The issue is more our mix of earnings. So we're not really able to do that. The Australian business is very successful, but it's very well established. And so some of our other markets are growing faster than Australia. So while we always bear in mind what we can do on franking credits that really is a split of how profits generated across the group.

Could you, for example, and I'm not an expert in the expert, you've got the Eagle eye. Could you, for example, say, well, we'll do a share buyback that favors everyone in to everyone but it might be that when the buyback comes back with a lot of the buybacks in the past as a capital portion and there's a dividend portion in a buyback. So too specific, when you sort of go back to the shareholders, you're doing the buyback in the market at the moment. But can you do it generally to shareholders, whoever want to participate in it and normally, the participants in that may get their amounts paid in the form of dividends. And I know you only have 15% available but for some super funds, things like that, that's very a tax-efficient way to do it.

Yes. The only way we could do that would be a capital return. And if we did a capital return, the issue is that isn't very tax effective for us. So companies that tend to do that is more about where you have a lot of franking credits. So we have looked at it. Like, as John, I think, outlined, we always look at what are the options invest first in the business. But then if we return to shareholders, what is the best way to do.

We feel like a capital return there, that's at the discretion of the shareholder. Isn't it?

It is to opt in. But what we don't think is, as John talked about, it's about creating long-term value as opposed to just returning money to shareholders.

Well, you are returning money to shareholders in the sense of a share buyback on the -- so I don't really understand the difference, too.

So I think the difference is if, as we buy back on shares and if you're still an existing shareholder, then for example, your dividend per share is going up because there are less shares in the market. whereas in essence, if we gave your capital return, you would just have that money, but it doesn't improve your long-term outlook in terms of the dividends you may get per share.

Well, that's a decision I make as a shareholder, whether I want to be a long-term holder in the company. And so I've got a decision here. Do I don't want to be a long term? Because I might say, I think BHP has got a bit of outlook in brands.

Yes. And you're exactly right. One of the things we have spent a lot of time is talking to shareholders about how would they like their returns as well in terms of what they would like and that's 1 of the things why we have a mix of dividends and share buybacks because there's sort of a mixed view across the market about what shareholders would perform.

Which shareholders you talk to? The big ones?

Abroad. No, no, look, to be honest, every shareholder that I've met, I always ask that question because people have preferences just like we chat about the business. So I think we think this is the best way to create long-term value for Brambles, but I'm really open to having a chat and if there's a different there's some pretty smart people out there, smarter than me, but that's sort of work a lot of these things out, too. You know what I mean. So -- but then you've got a government that will probably say we do have advantages to anyone that's getting a dividend. So that's my question. I'll let this gentleman ask his question.

Thank you. Mr. Chairman, we have a question from shareholder, [indiscernible].

Thank you very much. I'd like to congratulate Graham Chipchase for doing a good job.

Hear, hear. Thank you.

Continuing to improve the company, et cetera, et cetera. My interest is a couple of things. First is President Trump announced that companies domiciled overseas are likely to be paying a higher amount of checks. Are there any provisions or any steps being taken by Brad to offset, I mean, part domicile in the United States. So it's considered as a local company rather than as an overseas company, and therefore, subject to higher tax rates?

I think I know the answer, but I'd rather you go in case I get it wrong.

Sorry. Some of those provisions that you're talking about in terms of the administration related to companies who pay very low tax in the U.S. So we pay above that threshold at the moment in terms of the U.S. So -- but it's 1 of the things we look at, like the other gentleman's question, we're always looking at tax changes in the market and what's the right strategy for Brambles.

So has there been a shift?

No. I think as you can see, even despite the U.S. repair capacity challenges, we are generating strong profit growth in the U.S. So hence, we're paying the right proportion of attacks in the U.S.

I have other question. I know you're buying back shares, et cetera, et cetera. But as a shareholder over the years, I have participated in dividend reinvestment schemes. And although it might seem odd that you're buying back shares that are some companies have allowed people to participate in the dividend reinvestment program at the same time they're buying back shares. Can that provision be restored because I have an interest if confidence the company I'd like to be able to reinvest in the company that I have faded in and I see it's good value. But I mean there might be times on paying a higher rate where the other times are lower. So it averages out the lower DRP price, et cetera, et cetera. Is that likely that you might restore the dividend reinvestment program?

We've done quite a few, I think, over the years. So we look at it regularly. I don't think we have anything on the crowing board right now, but 3 years. We review it annually.

I think it's about 3 years and you stop the dividend investment programs. So what -- are you saying that, that is...

We continue to look at it. It's an option and we discuss it every year. I should say in the slide that thanks to the management's really hard work over the last few years that the company has become highly cash generative, so we could even have these discussions because I remember only a few years ago, we struggled to pay the dividend without borrowing. So it's an incredible change from those days. It's all credit to the team.

Sorry, I'm back again.

[indiscernible] will move in.

If you got a spare bedroom. That's what the Prime Minister says, you should put at your room. But first of all, I want to say Ken McCall is in the U.K. I'm sorry, it's not here. I always have a good chat with him about things that are Scottish common background, but I have you still awake there.

Yes. He's online. They're all online back in their home country, 6 ups of coffee.

I'll do 2 questions.

There he is. He's even winning a tie. I didn't know you had one, Ken.

I'm missing you, Ken. First of all, I just want to say that at this time of the year, a lot of companies are having their AGMs at the same time, like you're on St Homes, BHP, Bator, quite ASX another one. So it's only just -- I know it's very hard to book places get them. But do you guys look at how you can sort of maybe better arrange it so that BHP, I can, if I want to go to ASX, I can. And it's...

It's a really good question, and we do try. But of course, you don't know what dates other companies are choosing. And we always try and avoid being on a day when sort of CBA or BHP or something is reporting because that attracts more interest perhaps than ours does. We do try to do that. But unfortunately, as you say, there are a lot of companies reporting at the moment. So to get a clear day is almost impossible.

And this 1 is just for a general observation question. Sometimes I go around, I think the biggest asset you guys have got is that word chip because it's almost like the Rolls-Royce of pallets, if I can put it that way. and it has a great brand name and so forth. But sometimes to go around and I see, for example, Bunnings, just as an example. They've got Bunnings on their pallets, not a few other companies like that. Those pallets, are they belonged about Bunnings or are they really a cheap pallet.

No, they're a cheap, what we call white wood. It will be a cheap -- the less durable pallet than a Brambles pellet that they manufacture and have manufactured for them, they own them in themselves. They tend to use them generalizing now, but they tend to use them for just sort of moving product around in their own facilities that it's rare that they would use those pallets for full distribution.

[indiscernible] less quality there usually.

Yes. I don't know the exact you're referring to. But quite particularly common in the United States, more so [indiscernible].

It's like the Toyota the pallets.

Well, I'm not sure about that.

And there is another question, but I don't think I will. I just asked this because Brambles has got a great history. I think it goes back to more or something like that. I can't remember the brand Brambles Brothers.

Yes, it goes by Water Bramble in Hunter Valley.

In the Hunter Valley, yes. I think they were in cartage to begin with or something like that.