Metro Performance Glass Limited (MPG.NZ) Earnings Call Transcript

[Audio Gap] Meeting. So on behalf of the Board, the management and the staff of Metro Glass, I'm very pleased to welcome you to the 2021 Annual Meeting. This year is our first year of a hybrid meeting. So as well as the shareholders that are here in the room, we have a number of people connecting online, and they are coming to us virtually. It's a real pleasure to actually welcome people face-to-face because if you think about where we were a year ago, being able to hold a face-to-face meeting is now something a little more special than we thought it was in the past. For those of you in the room, just a couple of housekeeping points. In the case of an emergency, we need to evacuate the room. There are 2 fire exits, I'm pointing to them now. The assembly area is at the front there on the grass. Or you may get taken down into the grass in front of the other stand. If we do need to evacuate, staff from the Events Centre will be around to help us leave the building. So please follow their direction. If you need the bathrooms at all, they're out to my left up the stairs, they're on the right-hand side of the corridor. For those attendees online, welcome to you. Just as with our physical shareholders in the room, you will be able to vote, and you'll be able to ask questions. I'll provide you with instructions as we go through the meeting to make sure your questions and votes get through. But if you do encounter any issues with the connectivity, use the online portal guide. Or if that's no help you, please ring the 0800 number, which is 0800-200220. So that's 0800-200220. If you do have a question, I'd encourage you to send that through as soon as you can. This will give us some time to collate them, and we'll try and answer as many as we can. If we're unable to get through those questions during the meeting, though I expect we will, but if we don't or any of them require a more detailed response, our Investor Relations team will come back to you via your registered e-mail address. And we'll also put the responses on our website for everybody to see. Of course, for those in the room, we'll invite you to ask questions after the presentations and at each resolution as we go through. And so to the agenda for today. I'd like to shortly introduce my fellow Board members to you again. I'll make a few remarks. I'll then hand over to Simon, who will talk in more detail about the performance of the company and what's going on at the moment. We'll then come to the 3 formal resolutions -- sorry, we'll take questions after Simon's presentation. We'll then come to the 3 formal resolutions, and we'll take questions for each of those. And after the meeting, for those of you in the room, you're very welcome to join us for a morning tea and a discussion. So I would just note that my fellow directors and I hold a number of discretionary proxy votes. We intend to vote those all in favor of the resolutions as sent out in the Notice of Meeting. We've also received advanced postal votes. Some 54 million shares have already voted, about 29% of the issued capital of the company. And we will put some out of the information up on a slide later in the session. The company's financial statements for the 12 months to the 31st of March last 2021, together with our auditor's report, as were set out in our annual report, and that was released on the 21st of May. This is available on our website, and we also have a few hard copies here today if you would like one. So I would now like to introduce you to my colleagues on the Board. They're all sitting here to my left. We have Angela Bull, Mark Eglinton, Rhys Jones and Graham Stuart. You can find some details of each of the director's backgrounds and experience in the front of the annual report I just mentioned and also on the company's website. As we announced in May, our sixth, an Australian-based Director, Russell Chenu, who joined the Board before the company listed in 2014, retired in advance of this meeting. And on behalf of the Board, I'd like to thank Russell for his service, his support and dedication to Metro Glass over that extended period. We're now in the process of looking for an additional director, and that process is now underway, and we'll make an announcement in due course when we have concluded that process. We also have our Chief Executive, Simon Mander and -- here with us, and he's joined by our Chief Financial Officer, Brent Mealings. And we have our Company Secretary, Andrew Paterson, with us this morning. We also have a number of senior managers of Metro Glass. They're all wearing a name badge, and I encourage you to talk to them after the meeting over a cup of coffee. In addition to that, we have Troy Florence, who's from our auditors, PwC. He is our audit partner. And we also have Toby Sharpe from Bell Gully, our legal advisers, here in the room this morning. So welcome to both of you guys. I can confirm the Notice of Meeting was sent out to shareholders and that we have a quorum here today. And therefore, I declare the meeting open. I'd like to start my remarks by just acknowledging a few things, which I'm sure many of them are very, very obvious to everyone. But financial year 2021 was a very challenging year for Metro Glass for all businesses in New Zealand and Australia and, indeed, globally. Metro Glass displayed some real resilience in the face of the significant pressures and the uncertainties caused by the COVID-19 pandemic. If you recall, we began the FY '21 financial year in Alert Level 4 in New Zealand, and that meant our operations in the country were all completely closed down. And they stayed that way until late April when we moved into Level 3. Our Australian operations were also affected by restrictions. And while these, at the time, were less severe than the ones in New Zealand, they were in place for considerably longer and they continue to have an impact on us today. I'm sure you're all familiar with the news last night of a full shutdown in Victoria. So our whole team responded very quickly to the announcements of lockdown. We focused on the safety and the wellbeing of our people, on the wellbeing and satisfaction of our customers, on preserving our cash and ensuring that our balance sheet had enough liquidity in it to cope with what we thought was going to be a very, very challenging time for the company if you think back to April last year. And while in New Zealand today we're really fortunate to be operating in something like relative normality, the very quickly developing situation in Australia just highlights how we must remain alert to sudden changes in alert levels. and this is something that we focus on every day. As a consequence of the pandemic, there have been widespread disruptions to international shipping. Again, I imagine many people heard about that, to congestion at New Zealand ports, and this has impacted all importers and exporters from New Zealand, including ourselves. We recognized this early, and since late last year, we've been working to increase our safety stocks of materials in the country and to best utilize our natural -- national, sorry, processing and distribution footprint to limit the impact on our customers. And we've been quite successful in doing that. And while the scale of these disruptions has provided some real short-term challenges to us and some real financial impacts, we have managed quite well, and we think our customers have not felt extreme disruption because of this. These challenges have brought associated increases in costs. And where appropriate, we have put in place price rises in New Zealand and Australia to cover those. Glass demand -- despite all of this, the glass demand remained strong in both countries, but the competitive challenges of satisfying our customers are complicated by these ongoing challenges of the supply chain and the pandemic. And we expect this to be the environment we face for some considerable time going forward. When I reflect on the FY '21 financial results and while group profitability did decline, I believe the group's performance can be considered as solid, given the circumstances we were facing. This was achieved through the resilience of the people, staying connected to customers and remaining focused on customer service and quality. The New Zealand market remains competitive, and the commissioning of additional processing capacity by a competitor in the North Island early last year means that the total national processing capacity in New Zealand remains well above demand, even at these heightened levels. Our customers do have a choice as to who they partner with, and we want to ensure that choosing Metro Glass is one of the easiest decisions they have to make. So our strategy to defend our market share or defend our market-leading position, while we recalibrate our sales mix in this competitive landscape, is already delivering encouraging results. We've had strong growth in our B2C segment, in our retrofit channel and in other segments that have helped to offset the competitive nature or the competition for share in the residential window segment. And again, we expect this competitive dynamic to continue into the future. To thrive in this sort of environment, we must focus on providing a compelling and differentiated value proposition. We must maintain strong relationships across our customer base and ensure that we are providing a broad range of high-quality products that are delivered consistently and installed according to specification everywhere in New Zealand every day. That's our goal. Simon will share a little more about this during his presentation to you. Now as I mentioned, the demand for glass is strong and across all our market segments and consenting activity grew through financial year '21 and reached all-time highs earlier this year. And we believe that this will lead to continued strength in the residential construction market in New Zealand for some time to come, certainly the rest of this year and into next year. In Australia, we are a focused double-glazing manufacturer. The market is fragmented and competitive. And in that situation, global -- Australian Glass Group has continued to strengthen its value proposition, and we've delivered a significantly improved result in the financial year we're discussing today. Now after achieving a positive earnings before tax situation in the first half of last year, the AGG operations were negatively impacted late in the year by further COVID shutdowns, as we just talked about. And there was also a severe weather event in New South Wales, which was a large flood. You might remember, it disrupted distribution in the state quite considerably. And both of those events mean that we resulted in producing modest loss in Australia, instead of the breakeven, slight positive result we were hoping for. However, the growing use of double-glazing in the Southeast of Australia, the upcoming changes to the National Construction Codes and -- continue to underpin our revenue growth. In FY '21, AGG grew its double-glazing sales in Australia by 9%. And this momentum is continuing into the financial year -- into this financial year. We sort of now believe that the business there is on a solid footing. It's got a positive long-term outlook. And while COVID risks are absolutely evident in Australia, we are excited and interested by the growth opportunities we have ahead of us in Australia. If I just turn to our balance sheet for a moment. A strong -- despite COVID and the disruptions I mentioned, we generated a strong cash flow from operations. We had to focus our capital expenditure. We had to manage costs very prudently. By doing that, we were able to strengthen the balance sheet by reducing debt by $18.9 million, leaving us with a net debt at the end of the financial year of $48 million. In October last year, the group refinanced its banking facilities. We extended our term from August '21 out to October '23, and the total facility was reduced from the $120 million we had down to $85 million. And that included a $10 million standby facility that we never actually drew upon, and that will wind off in October. And this process of debt reduction over the last 2, 3 years has allowed us to set a new lower debt facility, which strikes the appropriate balance between minimizing our funding costs, but also providing us with financial flexibility if we need it, but at a much lower level than we had historically. The Board remains focused on ensuring that the company is a successful glass processor and that it delivers value. And while the current challenges in our marketplace and the pandemic response must dominate our attention, we now think we're in a position to seriously consider the future of the business, what should come next for Metro Glass, how do we take advantage of our growth opportunities in Australia, how will the overcapacity issues in New Zealand be resolved, and how do we ensure that this company, our company comes through this period in a market leadership position with a sustained financial performance. So in service of this, as goals are to maintain our leadership position in New Zealand by refining our mix of products and participation in segments, to take advantage of the opportunities that we see in the increasingly competitive market in New Zealand, and in Australia to grow and improve the profitability of our Australian business and benefit from the significantly increasing demand for double-glazing in the markets we participate in and all the while ensuring that our balance sheet is there to cope with any surprises that the market throw at us, but also to give us some capacity to deal with, to take advantage of those opportunities should they come our way. We've consistently communicated to you that reducing our leverage ratio, our debt to profit ratio has been a big focus of ours over the past 2 years. We've been aiming to get to a target of 1.5x, and that's the ratio we've been looking for. And despite the disruptions of COVID, the success in reducing our debt means we are going to achieve that target sometime this year. Once we do that, it's the Board's intention to resume dividend payments. And our intention is to declare a dividend alongside the FY '22 half-year results, which we'll announce in November this year. Just in accordance with our policy, we expect to pay a fully computed dividend of between 50% and 70% of our net profit after tax in broad terms. Earlier this year, the Board provided an update on our approach to managing the capital of the business. And we've adopted what I would call a more balanced stance, as we've reached this debt target ratio. So looking forward, we will have more capital available to spend in the business, to improve efficiency and effectiveness. And we will make unit capacity investments within our existing factory footprint, both in New Zealand and Australia. The timing of these capital investments is now dictated by our ability to source, import and install this equipment such that it doesn't impact on our production capability and essentially is affected by the marketing, the national distribution, importing disruptions that I mentioned earlier. So in addition to our capital spend and funding the dividend I've just mentioned, we will have further funds to continue to reduce debt, and we expect to continue to do this gradually in the coming years. And we will aim to get to the bottom of our target range of 1.5 -- or 1 to 2x debt leverage in the medium term. So to summarize, the threat of COVID and its complications are going to be with us for a long time. We're likely to see ongoing disruptions to the supply chain, both locally and globally. We will see shuts in Australia as we are. We've experienced them in New Zealand as well. We expect to see that again. We'll continue to monitor that. And I think we've shown that we have a proven ability to respond quite quickly to these things and keep the business operating to some extent, if not at 100%. It's the Board's view that the current positive market conditions are going to persist in both countries. And we will seek to take advantage of those opportunities to grow in Australia and maintain our position in New Zealand. So I'd like to close by just thanking my colleagues on the Board, the employees of the company, our loyal customers, our hardworking suppliers and of course our shareholders for their continued commitment and support to the company through what's been an incredibly challenging year. I'll thank you now, and I'll now ask Simon to come and make his remarks. And after that, we'll take questions. Thank you very much for your attention.

Thanks, Peter. Good morning, everyone, and thank you for joining us today in Auckland, both in person and online. Throughout the financial year '21, our operations in both countries were regularly impacted by fluctuating COVID-19 restrictions and international supply chain disruptions. Supply chain disruptions are continuing. And as I'm sure you're aware, COVID-19 is still impacting Sydney and Melbourne. I'm immensely proud of our teams who continue to be resilient and adaptable to manage these disruptions, which have impacted both New Zealand and Australia. Importantly, under all circumstances, we have maintained a strong connection and service level to our customers. Today, all 6 of our glass processing plants across our network in New Zealand and Australia are open and operational, with our Sydney plant operating on a restricted basis under a strict set of safety protocols. We're continuing to support our customers in New South Wales, supplementing supply from our Melbourne plant. As Peter noted, we have fully closed our New Zealand-based operations from late March to the end of April 2020. Pleasingly, from June 2020 onwards, activity in our retrofit and commercial glazing segments was strong. Our retrofit business grew 16% this year, despite the lockdown, with significant increases in inquiry levels and record growth in our forward book. This helped to partially offset the Alert Level 4 lockdown and heightened competition in the residential segment. The Australian business turnaround progressed well with stable operational performance and significantly improved EBIT. The business delivered a revenue growth of 1% year-on-year, despite the impacts of COVID-19, and has offset the exiting of the non-DGU market in the New South Wales. AGG achieved positive results for the first 3 quarters of the financial year. However, Victoria's snap lockdown in February and significant flooding in New South Wales in March negatively impacted momentum in the second half. Throughout -- though out of our control, our Australian team and I were disappointed by how the year ended, given the progress the business has made. As a group, we maintained -- remained firmly focused on our customers and our people, making good progress with both. I'm particularly proud of the progress made on our multiyear safety and wellbeing strategy, making steady progress through the year, implementing standards for controlling hazards effectively and improving early intervention processes. Our apprentice scheme is another highlight. We now have more than 80 apprentices enrolled with 15 qualifying during the year. Over the last year, Metro Glass has received recognition and a number of awards, and I'd like to share some of them with you today. As part of the Skills Highway Champion Awards 2020, Metro Glass achieved a highly commended for our Brighter Minds program that aims to support emerging leaders to develop knowledge and skills while working towards a New Zealand Certificate in Business. During the year, we had 55 employees graduate from the program. We won the Best Financial Innovation Project award at the 2021 CFO Awards for the implementation of our new ERP system, which went live in November 2020. And in the recent Windows and Glass Association of New Zealand Awards, we won the Sustainability Award for The Turanga Library in Christchurch, which featured our high-performance Low E double glazing structurally glazed by Metro Glass Christchurch team. And additionally, Metro Glass products were used by the winning entries in all 3 of the residential project categories. I'll now provide you with a brief summary of the group's financial performance in the 2021 financial year. The group achieved a solid set of results for the year, despite operating in an increasingly competitive market while facing regular externally driven disruptions, which impacted on our ability to build sustained momentum. New Zealand revenue of $179.8 million was down 12% versus the prior year, given the COVID-19 shutdown period, with an EBIT before significant items of $19.4 million, down 27%. Australian Glass Group's revenue grew by 1% to $52.5 million, with strong performance from all states and rebuilding the revenue to offset the exit of nondouble-glazing product sales in New South Wales. At an EBIT level, AGG were on track to deliver a modest profit for the year after a positive EBIT result for the first half. However, the COVID-19 lockdown in Victoria and flooding in New South Wales had negative impacts late in the year. As a result, AGG delivered an EBIT loss of $700,000 in FY '21, which, while disappointing, was a significant improvement from a loss of $3.6 million for the prior year. Group EBIT of $17.9 million includes the New Zealand and Australian segmental results as well as group costs of $300,000. This result was at the top end of our guidance of $16.5 million to $18 million, which we provided in February. We continue to strengthen our balance with net debt declining by $18.9 million year-on-year to $48 million. This was supported by strong operating cash generation, the sale and leaseback of 2/3 of our vehicle fleet and a reduction in capital expenditure. In May '21, we conducted the fifth of our 6-monthly customer surveys. These surveys provide us with vital feedback on our offering and our relationship with our customers and importantly on how we can improve. Overall, our ratings in New Zealand and Australia were largely consistent with previous surveys. And it's been great to see the New Zealand business achieve its highest results in the last 2 surveys. Pleasingly, our Australian results also remained strong, despite prolonged operating challenges due to COVID-19 throughout the year. To the right of the slide, you'll see the word chart, which reflects the types of feedback we received in New Zealand. The size of the word reflects the frequency of use and customers' responses: green positively and red negatively. Basically, the larger the word, the more it was used. In our most recent survey for every negative comment, there were multiple positive comments. Our customers are complementary of our people, relationships, customer service, account management and project management. However, inconsistencies in service performance predominantly around lead times in some regions were also raised. We were aware of these issues as we experienced some equipment reliability challenges around the time of the survey. As with each of these surveys, we continue to work with our customers to address specific issues and general service levels and to develop ways to improve and generate value for our customers. I'd like now to update you on the first 4 months of trading in the 2022 financial year, being April to July '21. While group revenue is significantly ahead of last year, any comparisons to Q1 FY '21 has little relevance, given the Alert Level 4 shutdown period in New Zealand last year. The continued strength in residential consents in New Zealand and approvals in Australia are supporting a robust and stable level of construction activity. In New Zealand, Metro Glass' market share in the residential window segment has now stabilized following the entry and subsequent growth of a new competitor over the course of FY '21. We expect the annualized impact to increase progressively through FY '22. Despite the changing industry dynamics, Metro Glass remains the clear New Zealand market leader and has started this year well. We are continuing to reposition our sales mix where we see opportunities, winning new customers and further strength in the retrofit segment. Sales in Australia in the April to July period were ahead of last year, buoyed by strong market activity across each of our key regions. However, from the middle of July, AGG has been operating under escalating COVID-19 restrictions in New South Wales in particular. And as I've mentioned, Victoria and Tasmania are fully operational and while our Sydney plant is operating on a restricted basis and is under a strict set of safety protocols. As we talked about, year-to-date revenue was higher in New Zealand, given the COVID-19 shutdown early in FY '21. However, these revenue gains have been offset to an extent by significant and widespread international shipping disruptions that have led to increased raw material and shipping costs. The nonrecurring nature of last year's government wage subsidy also has an impact. Where appropriate, we have introduced price increases in both New Zealand and Australia, which will partially offset these increased costs. We've remained focused on limiting the supply impact on our customers. And as part of this, we've been working hard to increase our safety stocks and to best utilize our national processing and distribution footprint. We believe that AGG is now on a solid footing and demonstrating sustained operational and financial performance. To support this next stage of AGG's growth, second shifts are being progressively introduced in both New South Wales and Tasmanian factories. While this process creates some inefficiencies and increased labor costs in the short term, as new staff are recruited and trained, ultimately, this will enable AGG to grow with the market, which will be benefiting from the changes to the National Construction Code anticipated in 2022 and '23. The tight labor market is adding to supply and capacity pressures in both New Zealand and in Australian industries. Recruitment is becoming a real challenge and while wage inflation is being managed. Our outlook for FY '22 is largely unchanged from our update in May. We believe activity levels across both New Zealand and Australia will likely be sustained at current levels for the rest of the '21 calendar year and well into 2022. The continued strength in residential building consents provides a positive signal of a strong pipeline of activity, though in New Zealand, industry capacities constraints will continue to dampen any rapid growth in the near term. The residential segment in New Zealand will continue to be competitive and dynamic, but we expect the customer churn being seen across the market to settle over the remainder of FY '22. In Australia, we are confident that AGG has embedded the improvements achieved in FY '21. The level of residential approvals in Australia improved significantly through FY '21, which will provide some support through the 2022 financial year. The group remains alert to COVID-19 risks and the significant disruptions in international shipping. Both are likely to continue for the foreseeable future. The group intends to invest more capital expenditure in FY '22 versus '21 aimed at efficiency and unit capacity, and we continue to take a prudent approach to managing operating costs. We will update shareholders further on the group's financial performance through our interim results announcement in November. Finally, our focus remains firmly on building a resilient organization that provides excellent operational performance, maintains strong customer connections and invests in and supports its people. And I'd like to iterate our key goals, which are to defend our leadership position and refine our sales mix to take advantage of opportunities in an increasingly competitive New Zealand market, to grow and improve the profitability of our Australian business and benefit from the increasing demand for double-glazing there and ensure our balance sheet remains strong and sufficient to cope with future risks and opportunities. Now before I hand back to Peter, I'd like to take the opportunity to thank all our shareholders, customers, suppliers, staff and the Board for their support over what has been a challenging year for everyone. Thank you.

Okay. Ladies and gentlemen, this is the first opportunity to ask questions. Before I throw that into the room, I'd just deal with a couple of questions we've already received. We received 2 questions in writing before the meeting, and we've received a couple online already. I'll deal with the 2 written ones here, and then I'm going to hand over to our Chief Financial Officer to answer the 2 that have come in while we've been holding the meeting. So question 1 was what is the annual cost of being listed on the ASX, the Australian Stock Exchange? And given the small volumes of our shares that are traded there, are there any plans to delist from the ASX? And in reply to that, we would say, look, our costs of listing on the ASX are relatively low. Our annual listing fee and the related costs are approximately $30,000 a year. And as Metro is a foreign exempt issuer, our listing costs are likely to remain at that sort of level. Essentially, we have to just comply with the New Zealand Stock Exchange rules in order to comply with the Australian ones. We've considered our position of staying listed there over time from time-to-time. But given our low costs and our plan to grow our activities in Australia, we still think it's worthwhile staying listed, and so we have no plans to delist at the moment. The second question was, what financial effect in the 2021 year did the lockdowns in Australia and the flooding event in New South Wales have on the financial year? Now Simon mentioned in his address that we made approximately a $700,000 loss in Australia. And essentially, all of that or most of that can be attributed to those lockdown events in Victoria and the flooding in New South Wales late in the year. So that's a good approximation of the impact on our bottom line. We have had 2 questions online while the meeting has been going. So I'll hand over to Andrew. And then so you hear a different voice, Brent will answer them.

Sure. So the first question from online was, in prior AGMs, you provided an update on net debts. Can you advise the value of the net debt at June '21 or July '21?

Yes. I mean we did disclose that this time last year. We -- I mean the reality is we're about the same. And the reason for that is that, as Peter and both Simon mentioned, we've been investing capital in the first months of this financial year as well as increasing our stock holdings of glass, given the disruptions of the imports issues that we're experiencing.

And there's one more -- or several one, okay.

So the next question is, given 2021's Q1 revenue is not a good comparison for New Zealand's 2022 Q1 revenue, how did that revenue compare to 2020's Q1 revenue?

Can you answer that?

So if I maybe just talk quickly to each of our key markets, I mean, Australia first. So Australia, we are definitely seeing this continued increase in revenue in Australia relative to 2020, even though we had, if you remember, quite a significant transformation in our New South Wales business in particular. So that revenue is in a good -- on a good trajectory. In New Zealand, relative to 2020, the entry of the competition, particularly in the windows segment area of our business, will mean that we will be below on a comparative basis at a revenue level between Q1 2022 and Q1 2020.

The next question, were the price increases prepared to restore the New Zealand margin levels to those achieved in 2020, given the margins fell in 2021? And with the large cost pressures outlined, were the price increases early enough to recover all of these cost pressures in the current financial year?

Keep going.

So we did -- we've moved prices in New Zealand and Australia. We moved our prices in New Zealand market in July, and we've done that in August in Australia. Reality, I guess, for us in New Zealand is that we are in a very competitive market. And we are, like all of our other competitors and other businesses in New Zealand, under the same cost inflationary pressures as everybody has. So we're intending to continue to evaluate our position as we go forward.

The next question, the 2021 results showed EBITDA of $38 million and a 1.5x multiple. The gives scope for net debt to be $37 million in dividends paid. Net debt was $48 million. Could a dividend have been paid in '20 and March '21 and still meet the 1.5 net debt target? Were there other factors in the decision not to pay a dividend?

Andrew, do you want to actually answer that one? You know the answer to that.

Sure. Yes. So I guess at year-end -- thanks, [ Daniel ], for the question, our net debt to EBITDA ratio was 1.7x. And so it wasn't quite at 1.5x target, and the issues we faced right at the end of the year in Australia were one of the reasons that we didn't quite get there. The -- we also had, I guess, some agreements with our banks as part of the refinancing process that it had some restrictions around kind of when and what dividends we paid. And so that was one of the considerations. But obviously, the Board have other considerations. And so the decision was not to pay a dividend at March. But obviously, we've guided that we intend to do that alongside the interim results in November.

I think we would add -- go ahead.

Sorry. I was just going to mention just a technical point. We report on a post IFRS 19 basis, which is the lease accounting change that happened last financial year, and we test our covenant ratio on the pre-IFRS EBITDA number. So you would -- on the face of the P&L, you would come up with 1.5. But if you did -- do it on a post -- sorry, pre-IFRS 19 basis, you would come up with 1.7, which is what Andrew just mentioned.

Any further questions?

Yes. Okay. Sorry, and thanks for the questions. So the next question...

We'll give you a go shortly, I'm sorry.

What are the levels of glass wastage in production?

Yes. So this is a question about glass wastage on production. So that's -- it's very variable depending on the product mix. And we have been doing our benchmarking against companies overseas. And where we sit there is sort of in the middle of similar businesses with the same type mix as us. The other -- the big -- other big part of the glass -- or the sort of wastage of glasses is as we cut. So that's the yield of the raw sheet. So that, again, we benchmark ourselves against internationally there. And we're sort of sitting at a similar sort of level in that 15% to 20%, depending on the mix of that yield of the catch -- of the raw sheet. All of that, I've seen some commentary somewhere people were thinking that, that waste glass goes to the landfill. I could show you that it doesn't. Any waste glass from all of our factories is recycled. And so we -- none of our glass goes into landfill.

Thanks. One final question I have at the moment from [ Ben Renshaw ]. Will share repurchases play a role in your capital allocation process?

I can answer that one. Share buybacks are definitely one of the tools that a Board has when it has decisions to make around capital reallocation. We have thought about this over time. But at the moment, it is not part of our thinking. We've announced the dividend. We want to continue to reduce debt and we think -- and then spend capital in the business. So we don't have a plan to go into a share buyback program. If we ever did, it would be very well signaled and well-bounded. So at this stage, we do not have that plan.

Okay. I think we'll...

That's everything online.

I was slightly caught off guard by the number of questions that came through online. So let's take an opportunity to take any questions from the people in the room. If you just put your hand up, mic at the back there. I think it's got a microphone. There's one down here, mic, if you come down to the front. If you could just say your name so that we get it on to the record because everything is being recorded. And we'd just like to know who asked what. So sir?

My name is [ Kaushik Patel ]. I'm the shareholder. There have been a comprehensive explanation to a lot of things. I had a few questions over here. I think you might have answered a few. But it's a cause of concern when probably you said that the debt level from the last year's accounts to the current, which is 4 months on, are at the same level. Am I right?

Yes, yes.

Similar level. So the question over here is you are mentioning about getting the debt ratio prior to paying dividends, all right? At the same time, you have a commentary over here, which says that by 6-monthly result, we will be probably paying dividends. This is what the intention is. Now again, I want to know whether the business is still in the catches of the bankers because you did mention that the banks had put the restrictions. So I'm highly concerned whether the Board is understanding the business aspect of it in this low interest regime. If you have done well and if you have come out of the ratios, which are desirable, then probably the bank should be on the line as well in terms of talking to them and saying that, "Oh, no. Wait a minute. You're partners in business. You can't dictate stuff," because as shareholders, we have heard a lot of terms like long term, long term, long term. I think 3, 4 years, good enough. COVID, I can understand. But there are a lot of areas where today, the answers which have come are probably not assuring me at least that we are heading towards dividend.

Sure. I will have a go at that, and I'm sure Brent will have a go as well. I can assure you we are heading towards dividend payment in the half year. The -- any restrictions or covenants that our banks put on over and above the normal tests that you would imagine in a debt facility have largely wound off. So we are not -- we don't need their permission to do anything from now on. Our increased debt position at the moment is a momentary thing, largely because we've decided to bring forward a little bit of capital spend. We had to make some deposits on some large pieces of equipment. We would have been making that in a few months' time anyway. But we're mindful of the fact that it's taking a lot, lot longer to get things here to fit in with our installation window. So we've made that choice. So that's gone up a little bit. Similarly, we've increased our safety stocks because of the disruption to the glass supply, and that's had a momentary blip as well. But I can assure you, sir, that we are -- our banks are onboard. They are not being unreasonable. If you think back to when we were renegotiating this, the world was a much, much more uncertain place back then and people wanted to make reasonable requests of companies as they -- as you refinance. And we -- the team negotiated quite well on that. So yes, we'll hold those for a short period, but then they come off, and we go back to normal. And that's where we are now. So you should rest comfortably that our intention is to pay a dividend, that our debt ratio and our debt level is solely in the hands of the company and the Board, And our bankers are pretty happy with us actually, I think, as to where we've got to. So we don't mean to confuse you by, I guess, explaining where we're at. So hopefully, that's enough to give you some assurance. Brent, do you want to add anything? Simon? Okay. So we are on track.

Peter just mentioned about bringing capital forward as the shipping disruptions at the moment, we're allowing on capital equipment sort of 6 to 8 weeks additional shipping time because we need -- there's a finite window for us to install the equipment. So if it -- we won't have to guarantee that, that equipment will be here in time for the -- basically the Christmas period. So we've been ordering this equipment much, much earlier than we normally would have. So that's that factor there. So -- and that's part of the reason why last year, our capital was -- has been -- was a bit lower, simply because we just -- we don't know whether we'd be able to, a, get the equipment here; and b, then, are we going to be able to get technicians into the country to install. So there was a lot of labor capital spent last year.

So did you have a second question? And the mic will come to this gentleman. One more there and then we'll come to you, sir.

Well, one thing I must say, I would like to congratulate Simon for coming into the company as a CEO. And there has been a progress, I can tell you that. But as I said, the question is very clear in terms of, if you look at the building sector today in New Zealand, the company is listed on the stock exchange in the building sector, to name a few, Fletcher Building, Steel & Tube, they are all performing exceedingly well in the present circumstances. And we are seeing good growth numbers coming in and a bottom line growth coming in as well. So I think the Board has to realize that in terms of logistic issues and costs going up, you should be able to recover the cost from the customer. And that's very important because you are not chasing bad business. If you are doing any numbers, it has to add to the bottom line. And I do respect that, that should be in the consideration. And I hope so that happens.

Thank you for that. Mic down here to the gentlemen in front.

I'm just asking about your retrofitting. I guess, that means double-glazing, the same thing, retrofitting, double-glazing. And maybe you have teams of people operating all around New Zealand. I just wonder how long it takes for a team to get out and get the quote and get the job done. And are those people -- it seems to me that's the backbone of the business, that those teams should be operating pretty well.

Yes. So our retrofit business is sort of circa $25 million a year and growing. So the exact number for the last year, Brent, from retrofit segment, it's growing quite strongly. And yes, it is double-glazing. So we're retrofitting, double-glazing units into existing window frames in a house. And so the sales process of that is someone books an inquiry or we follow up and a salesperson will go and visit the customer at their house. And we can provide an estimate on the spot to them. Then -- if that estimate, as they say, "Yes. I want to progress," we do what we call a final measure. So that depends on when the customer says yes, are interested and proceeding. We go and visit and do a final measure. It's typically the salesperson does that as well. We provide them a quote on the spot. And then when that customer accepts that, depending on the location and the access and those sorts of things. At the moment, it's between 4 weeks and 12 weeks to do the installation program. That's done by a crew of between 2 and 4 people. And that can be done and -- just depending on the size of the job, it can be a day or some large jobs might take 4 weeks where we do sort of like a hotel or something like that. Yes, so it's a very -- we've been doing a lot of work on standardizing how we do that across the company. And I think we're doing it very, very well, which is one of the reasons why that part of the business is growing. And we're seeing very good growing margins in that business as well, which is pleasing. Yes.

Thank you. Sir, the mic on your -- down the back there.

Yes. [indiscernible], and I'm a shareholder in the company. Just a couple of short questions. I was just interested, you were talking about apprenticeships that you have. What sort of trades are those in?

Yes. So -- we're primarily in the glass trade, so we have glass processing. So that's within the factories. And then the glazing, and that's on the installation side.

Really specialized apprenticeships.

Yes. Yes. And it's covered under the construction industry program. So we've got about, I think, 85, 86 at the moment, and we've got half a dozen that are just going through the sign-up process. I've challenged the business to get to 100. And we've sort of been sitting around this level for a year or so now just because the people come out of their time as we bring new people in. We would like to expand that across to people in the engineering trades as well, but we're just sort of working through that. Yes.

The other question that I had is, we've got about 4 months of the current year gone. How is both the revenue and EBIT looking compared to, say, the last year? Is it about that sort of level? Or is it improvement -- an improvement and perhaps getting back to the level of the previous year?

Yes. Look, just making a comparison to last financial year, this is -- as just -- you just really can't because New Zealand was shut for 6 weeks basically or 5 weeks. And then so -- it's just -- we're just not able to really make it meaningful. And it's best that we give you an update there on November on the half year where we can sort of show you a better comparison, okay?

Yes. I was just thinking, since we've still got the COVID restrictions, maybe not with a lockdown and so on, that's not quite as bad as last year, but it's certainly better than the -- better than last year and worse than the year before. That's why I was looking for the comparisons. I think you're sort of saying that you haven't got the figures pulled together yet for the full year.

Yes. I mean we've just got the July sales. We're still working through on this. It's just better that we do that at the half year. Australia, the revenue is up. It's tracking well. The restrictions in Australia, like yesterday, I got a call from Steve in Australia saying, "Man, we've just gotten 2 weeks shut down and lockdown in Melbourne." It's incredibly fluid over there, but all our plants are operating. Sydney is a little bit reduced in capacity. But yes, sales in Australia, we're very pleased with where they are, and the demand is good, and the same in New Zealand.

Thanks for those question. Mic down the front here. And any other -- we've got one down here. Any other questions in the room? We'll get a mic to somebody in back. Sir?

[ Ross Marel ]. I'm just curious. Obviously, with -- so New Zealand were maintaining in their supply chain and capacity pressures. But some of your language about Australia, there seems to be underneath a lot of positivity there that there was a word used, it's fragmented market. I'm just curious about there seems to be a lot of potential there in your language. Could you clarify that, please, where the growth is, especially in line with the word fragmented?

Yes. Yes. So look, in Australia, it's a very, very different market to New Zealand, in that New Zealand basically 95% plus of all residential uses double-glazing, okay? If you go into Australia in New South Wales, it's sort of -- it's a bit hard to get the exact number, but it's about 15%, maybe a little bit -- it's between 15% and 20%, probably more of 15% of newbuilds use double-glazing, okay? If you go into Victoria, it's in that 50%, 55%, maybe up to 60%. Tasmania is about 50%. So they're a long, long way behind in the adoption of double-glazing there. So that's -- and that is changing. But one of -- there is a changing in the building codes coming next year -- late next year. It's actually implemented, and it rolls out across different zones around the eastern seaboard states. And so that will basically require people to use double-glazing in their houses. So that will have a massive drive -- growth and the demand for double-glazing. So that's where -- why we're very positive about the Australian market because we are viewed in the Australian market as being the leading double-glazing supplier. And AGG always has been viewed as that. And yes, it is quite a fragmented market. So you have -- so there's one other player in the Australian market that operates in 3 states that we operate. But there are a number of players in each of those states. So we sort of have that ability across the whole of those -- that eastern seaboard. So we're quite well positioned there. Also we have -- in my view, very strongly, is that we have by far the best range of Low E soft-coat glass available to produce a range of double-glazing products that suit different sort of applications, whether you're wanting to keep solar gain out, keep warmth in and all that sort of thing. It's quite a technical offering. Yes.